Hovnanian Enterprises Turns To Profit In Q4, Results Beat View

(RTTNews) - Home builder Hovnanian Enterprises, Inc. (HOV) on Thursday reported a turnaround to profit in the fourth quarter on strong revenue growth, while the prior-year quarter's results included wider losses on debt extinguishment. Both earnings per share and quarterly revenues beat analysts' expectations. Looking ahead, the company projects greater levels of profitability in fiscal 2014.

Ara Hovnanian, chairman, president and chief executive officer of Hovnanian Enterprises said, "Although our sales slowed from July through September due to the adverse impacts of higher mortgage rates, the sequester and the government shutdown, we are happy to report that our sales improved back to prior year levels in October and exceeded last year's levels in November."

The Red Bank, New Jersey-based company reported net income for the fourth quarter of $32.82 million or $0.21 per share, compared to net loss of $84.41 million or $0.59 per share in the prior-year quarter.

The latest quarter's results include loss on extinguishment of debt of $760 thousand, compared to loss on extinguishment of debt of $87.03 million in the prior-year period.

On average, 13 analysts polled by Thomson Reuters expected the company to report earnings of $0.16 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenues for the quarter grew 22 percent to $591.69 million from $487.05 million in the same quarter last year and beat analysts' consensus estimate of $582.89 million.

Total homebuilding revenues for the quarter increased 22 percent from the year-ago period to $579.18 million, while financial services revenues declined 2 percent to $12.51 million.

Hovnanian's net contracts for the quarter, including unconsolidated joint ventures, declined 8.9 percent from last year to 1,315 homes, and dollar value of net contracts declined 4.5 percent to $490.5 million.

Home deliveries, including unconsolidated joint ventures, increased 3.8 percent from the year-ago quarter to 1,816 homes.

Contract backlog at the end of the fourth quarter, including unconsolidated joint ventures, stood at $848.38 billion for 2,392 homes, a year-over-year increase of 14.3 percent and 11.5 percent, respectively.

The contract cancellation rate, including unconsolidated joint ventures, for the third quarter was 23 percent, the same as in the year-ago period.

The company recorded a 430 basis points year-over-year improvement in home building gross margin, before interest expense and land charges included in cost of sales, to 22.6 percent.

For fiscal 2013, Hovnanian's net income was $31.30 million or $0.22 per share, compared to net loss of $66.20 million or $0.52 per share in the prior year. Total revenues for the year increased 24 percent to $1.85 billion from $1.49 billion last year.

Analysts expected the company to earn $0.16 per share for the year on revenues of $1.84 billion.

Looking ahead, Hovnanian said, "Entering 2014 with a higher backlog, gross margin and community count, gives us optimism that, excluding any expenses related to early retirement of debt, fiscal 2014 should result in greater levels of profitability and continued leveraging of our fixed costs."

Hovnanian added, "Further, we continue to believe that household formations, the primary driver of housing demand, will ultimately lead to increased demand for new homes and we continue to believe that our industry is still in the early stages of a housing recovery."

In Thursday's regular trading session, HOV is currently trading at $5.10, up $0.11 or 2.20 percent on a volume of 846,245 shares.