Hovnanian Profits Up, Revenues Down, Guidance Strong

Hovnanian Enterprises Inc. (NYSE: HOV) reported fourth-quarter fiscal 2015 results before markets opened Friday morning. The homebuilder posted quarterly diluted earnings per share (EPS) of $0.16 on revenues of $693.2 million. In the same period a year ago, Hovnanian reported adjusted EPS of $0.23 on revenue of $698.39 million. Fourth-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.09 and $739.45 million in revenue.

For the full fiscal year, the company reported a net loss of $0.11 on revenues of $2.15 billion, compared with 2014 fiscal year adjusted EPS of $0.14 on revenues of $2.06 billion. Analysts were looking for a net loss of $0.17 on revenues of $2.19 billion. Fourth-quarter and full-year 2014 earnings exclude a $285.1 million tax benefit.

Pretax income, excluding land-related charges and losses on extinguishment of debt in the fourth quarter of fiscal 2015 totaled $41.8 million, compared with $39.3 million in the prior year’s fourth quarter. For all of fiscal 2015, the pretax loss, excluding land-related charges and losses on extinguishment of debt, amounted to $9.7 million, compared with income of $26.6 million during fiscal 2014.

Gross margin slipped from 19.3% in the year-ago quarter to 18.0% in the fourth quarter of 2015, and full-year gross margin fell from 19.9% to 17.6%.

The company’s CEO, Ara K. Hovnanian, said:

Our 71% growth in inventory over the past three years combined with the 49% year-over-year increase we achieved in our contract backlog dollars at October 31, 2015, and the 29% year-over-year increase in net contract dollars during the fourth quarter of fiscal 2015, gives us confidence in our ability to significantly increase revenues and profitability during fiscal 2016. Given the $300 million of land banking arrangements that we recently announced, we are comfortable with our liquidity position as we begin fiscal 2016.

The company reiterated full-year 2016 guidance for revenues of $2.7 billion to $3.1 billion and pretax profit excluding certain items of $40 million to $100 million.

Shares traded up about 7.6% in Friday morning at $1.84, in a 52-week range of $1.37 to $4.32. Thomson Reuters had a consensus analyst price target of $2.63 before the results were announced. The highest price target is $3.00.

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