Earnings Preview: Hovnanian Enterprises

AP News
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Posted: Dec 15, 2009 4:50 PM

Hovnanian Enterprises Inc., one of the nation's largest homebuilders, reports fiscal fourth-quarter earnings on Wednesday. The following is a summary of key developments for the period.

OVERVIEW: The Red Bank, N.J.-based company has operations in 18 states and was ranked the sixth-largest homebuilder in the country last year by Builder magazine. It is expected to report a quarterly loss for the three months ended Oct. 31.

Homebuilders have seen new home orders improve this year, thanks to low mortgage rates and a tax credit of up to $8,000 for first-time homebuyers. Sales of new homes have increased six out of the past seven months. They dipped in September, but surged in October to the highest level in more than a year.

Still, they remain well below year-ago levels. Job losses and tight access to credit for many would-be homebuyers continues to dampen the strength of the housing recovery, and that's kept homebuilders such as Hovnanian in the red.

The builder has reported a loss for 12 consecutive quarters, going back to its fiscal 2006 fourth quarter.

To cope with the housing slump, Hovnanian has cut back on the number of unsold homes it builds and slashed its work force by about 74 percent since June 2006. At an investor conference last month, CEO Ara Hovnanian said he believes the housing market is at or near the bottom, but cautioned that unemployment and foreclosures must decline further for the recovery to take hold.

"This industry is not going to truly rebound until some jobs are being created because, if someone is looking to buy a home, they are not going to do so if they are in fear of losing their job," Hovnanian said.

Still, Hovnanian and other builders are gearing up for the prospect of improved sales and have been stepping up land acquisitions. During the third and fourth quarter, the builder snapped up some 4,000 home sites across the country, with about half of them purchased as part of a joint venture.

"We are happy to say that we have begun to see the log jam free up a little bit and sellers, primarily banks, getting realistic on the price that they are expecting to receive," Hovnanian said.

BY THE NUMBERS: Analysts polled by Thomson Reuters predict a loss of $1.40 a share on revenue of $454.1 million for the quarter. The 10 earnings estimates range from a loss of 56 cents to a loss of $2 a share.

In its fiscal fourth quarter last year, Hovnanian lost $450.5 million, or $5.79 a share, on revenue of $721.4 million.

WHAT'S AHEAD: Last month, Congress extended the first-time buyer tax credit through April and expanded it to include $6,500 for existing homeowners. That could help Hovnanian as it enters the traditional spring selling season next year.

STOCK PERFORMANCE: Hovnanian shares rose 14 percent to finish the quarter at $3.91. The stock added 10 cents to close at $3.80 Wednesday.

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On the Net:

Hovnanian Enterprises Inc.: http://www.khov.com