Hovnanian Enterprises falls to a loss in fiscal 1Q

AP News
Posted: Mar 01, 2011 5:55 PM
Hovnanian Enterprises falls to a loss in fiscal 1Q

Hovnanian Enterprises Inc. said Tuesday it returned to a loss in its fiscal first quarter versus a year earlier, when the homebuilder benefited from a hefty federal tax gain.

The company also reported its net contracts for new homes dropped 13 percent in the November to January period, despite a pickup in customer traffic and home orders in January.

Ara Hovnanian, the builder's chairman, president and chief executive, said he's encouraged by the recent uptick. But the executive cautioned it's still too early to tell how the spring, traditionally a strong period for home sales, will fare compared with last year, when federal tax credits helped motivate buyers to purchase a home.

Homebuilders are hoping to see improved sales this spring after a dismal 2010 that marked the fifth consecutive year new home sales declined.

Sales sank last year to the lowest level on records going back 47 years. They tumbled again in January.

While harsh winter weather was likely a factor in the January sales decline, many would-be homebuyers continue to be put off by high unemployment and uncertainty over home prices.

In recent weeks, several large builders have reported their home deliveries and contracts for new homes fell sharply in and around the final months of last year.

For the November to January quarter, Hovnanian reported net contracts for new homes, excluding joint ventures, fell to 792 homes. Completed home sales, also known as home deliveries, totaled 845 homes, down from 1,091 in the prior-year quarter.

The rate at which buyers walked away from contracts for new homes rose to 22 percent from 21 percent a year earlier.

Homebuilders are a bellwether for the housing market and the economy. Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, by some estimates.

Hovnanian, which is based in Red Bank, N.J., has operations in 18 states and is one of the nation's largest builders of senior housing communities.

The company said it lost $64.1 million, or 82 cents a share, for the three months ended Jan. 31. That compares with net income of $236.2 million, or $2.97 a share, in the prior-year period, which included a tax gain of about $291 million.

Revenue fell 21 percent to $252.6 million from $319.6 million the year before.

Analysts polled by FactSet were expecting a loss of 66 cents a share on revenue of about $245.4 million.

Shares slipped four cents to $3.85 in aftermarket trading after the company released its results. The stock fell 19 cents, or 4.7 percent, to $3.89 during the regular session.

Like other builders, Hovnanian has been buying land and opening more communities where it's selling homes. It's banking on sales at these newer, more profitable communities to help it weather the softer housing demand.

Hovnanian also has been tapping the equity markets for funds to pay down debt.

Last month, it raised about $300 million in debt and equity and used the proceeds to pay off debt that was coming due next year and in 2013.