Home builder Hovnanian Enterprises, Inc. (HOV) on Thursday reported a loss for the fourth quarter that narrowed from last year, reflecting improved margins, lower expenses and strong double-digit revenue growth amid 41 percent surge in home deliveries. Quarterly revenues topped analysts' expectations.
The company noted that it reported its first quarterly pre-tax profit, excluding gains or losses on extinguishment of debt, since the industry downturn began in 2006.
Excluding land-related charges and gains or losses on extinguishment of debt, the pre-tax income for the fourth quarter was $8.1 million, compared to a pre-tax loss of $45.2 million in the year-ago quarter.
"We are very happy to report a pre-tax profit before debt extinguishment gains or losses for the first time in 25 quarters. The fourth quarter marked the sixth sequential increase in our quarterly gross margin percentage, and our gross margin has improved 350 basis points over that period," Chairman, President and CEO Ara Hovnanian said.
The Red Bank, New Jersey-based company reported a net loss of $84.41 million or $0.59 per share for the fourth quarter, narrower than $98.35 million or $0.90 per share in the prior-year quarter.
The results for the latest quarter include an $87 million loss on extinguishment of debt associated with the 2012 fourth quarter $797 million debt refinancing.
On average, eight analysts polled by Thomson Reuters expected the company to report a loss of $0.06 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenues for the quarter grew 42.6 percent to $487.04 million from $341.62 million in the same quarter last year, and topped nine Wall Street analysts' consensus estimate of $461.75 million.
Hovnanian's net contracts for the quarter, including unconsolidated joint ventures, rose 22.8 percent from last year to 1,443 homes, and dollar value of net contracts also increased 46.3 percent. Home deliveries increased 40.6 percent from the year-ago quarter to 1,750 homes.
Contract backlog at the end of the fourth quarter, including unconsolidated joint ventures, stood at $742.2 million for 2,145 homes, a year-over-year increase of 34.4 percent and 29 percent, respectively.
The contract cancellation rate, including unconsolidated joint ventures, for the fourth quarter ended October 31, 2012 was 23%, compared with 21% in last year's fourth quarter.
"Furthermore, our sales growth continued with a 46% increase in dollar value of net contracts for the quarter and a 34% increase in dollar value of our backlog," Hovnanian added.
The company recorded a 280 basis points year-over-year increase in home building gross margin and reduced its total selling, general and administrative expenses ratio by 690 basis points from last year. Home building gross margin, before interest expense, also expanded 220 basis points to 17.8 percent from last year.
For fiscal 2012, the company reported a net loss of $66.20 million or $0.52 per share, sharply narrower than $286.09 million or $2.85 per share in the prior year. Analysts expected the company to report earnings of $0.09 per share for fiscal 2012.
Total revenues for the full year grew 30.9 percent to $1.49 billion from $1.13 billion in the previous year. Street was looking for full-year 2012 revenues of $1.45 billion.
In Thursday's regular trading session, HOV is currently trading at $5.32, down $0.17 or 3.10% on a volume of 4.48 million shares. In the past 52-week period, the stock has been trading in a range of $1.27 to $5.80.
by RTT Staff Writer
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