Hovnanian Slips To Loss In Q2, Results Miss View

(RTTNews) - Home builder Hovnanian Enterprises, Inc. (HOV) on Wednesday reported a loss for the second quarter, compared to a profit last year, when results were boosted by tax benefits. In addition, home deliveries in the latest quarter declined 7 percent from last year. Results for the quarter missed analysts' expectations.

Ara Hovnanian, chief executive officer of Hovnanian Enterprises said, "... our sales pace during April and May was choppy and the total monthly sales pace per active selling community in both months fell short of last year's levels."

Red Bank, New Jersey-based Hovnanian's net loss for the second quarter was $7.90 million or $0.05 per share, compared to net income of $1.32 million or $0.01 per share in the prior-year quarter.

The latest quarter's results include loss on extinguishment of debt of $1.16 million, while the prior-year quarter's results included federal and state tax benefits of $2.6 million.

On average, 11 analysts polled by Thomson Reuters expected the company to report earnings of $0.03 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenues for the quarter grew 6 percent to $449.93 million from $423 million in the same quarter last year, but missed analysts' consensus estimate of $476.72 million.

Total homebuilding revenues for the quarter increased 7 percent from the year-ago period to $440.52 million, while financial services revenues declined 12 percent to $9.41 million.

The company recorded 130 basis points improvement year-over-year in home-building gross margin percentage, before interest expense and land charges included in cost of sales, to 20.2 percent.

Hovnanian's net contracts for the quarter, including unconsolidated joint ventures, declined 2.2 percent from last year to 1,907 homes. However, the dollar value of net contracts, including unconsolidated joint ventures, rose 1 percent to $703 million.

Home deliveries, including unconsolidated joint ventures, decreased 6.5 percent from the year-ago quarter to 1,331 homes.

Contract backlog at the end of the second quarter, including unconsolidated joint ventures, stood at $1.135 billion for 3,032 homes, representing year-over-year increase of 10.9 percent and 7.3 percent, respectively.

The contract cancellation rate, including unconsolidated joint ventures, for the quarter was 17 percent, up from 16 percent in the same period last year.

Looking ahead, Hovnanian said, "Given the increases in our consolidated net contracts, community count and backlog, we currently anticipate continued growth in revenues resulting in profitability during the second half of fiscal 2014. We expect to be profitable for all of fiscal 2014, but our profitability is expected to be more back-end weighted than it was in fiscal 2013."

Street expects the company to earn $0.24 per share for the year on revenues of $2.04 billion.

HOV is currently trading at $4.47, down $0.11 or 2.40 percent on a volume of 1.56 million shares.