Tags: Hovnanian | homes | sales | profits

Hovnanian Reports Quarterly Profit as Home Prices, Sales Rise

Monday, 09 Sep 2013 12:04 PM

Hovnanian Enterprises Inc., the best-performing U.S. homebuilder stock in the past year, reported a profit for its fiscal third quarter as sales and prices increased amid a nationwide housing recovery.

Net income for the three months ended July 31 was $8.5 million, or 6 cents a share, the Red Bank, New Jersey-based company said in a statement. That matched the average of six analyst estimates, according to data compiled by Bloomberg. A year earlier, earnings of $34.7 million, or 25 cents a share, included the reversal of $37 million of state tax reserves.

While a jump in mortgage rates from near-record lows in May is beginning to affect contracts to buy new U.S. homes, completed deals for builders such as Hovnanian remain strong, according to Robert Curran, a managing director at Fitch Ratings in New York.

“They have had the wind at their back and that’s enabled them, along with a focus on efficiencies, to show healthy improvement similar to other public builders,” Curran said in a telephone interview before Hovnanian’s results were released.

Deals to purchase new homes in the U.S. dropped 13.4 percent in July from the previous month, the Commerce Department said on Aug. 23. The median price rose 8.3 percent from a year earlier to $257,200.

Hovnanian’s revenue increased to $478.4 million in the quarter from $387 million a year earlier. The average selling price was $358,899, up 8 percent. Net contracts climbed 1.8 percent to 1,568 homes and the contract backlog, an indication of future sales, rose 18 percent to 2,893 homes.

Hovnanian has been able to raise prices because inventories of existing homes remain tight, said Brendan Lynch, a homebuilding analyst for Sidoti & Co. LLC in New York.

Tight Inventory

“Their average sales price has been increasing quite significantly,” Lynch said in a telephone interview last week. “The prevalence of negative equity among homeowners is preventing them from selling homes on the resale market, and that’s creating the inventory shortage.”

While rising mortgage rates restrained sales in July and August, the company expects to be profitable for the full fiscal year with “strong results” for the fourth quarter, Chief Executive Officer Ara Hovnanian said in the statement.

Hovnanian rose 1.8 percent to $5.13 at 10:16 a.m. in New York. The shares gained 64 percent in the 12 months through Sept. 6, compared with a 9.4 percent advance in the 14-company Bloomberg Industries homebuilding index.

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Hovnanian Enterprises Inc., the best-performing U.S. homebuilder stock in the past year, reported a profit for its fiscal third quarter as sales and prices increased amid a nationwide housing recovery.
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2013-04-09
Monday, 09 Sep 2013 12:04 PM
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