Home builder Hovnanian Enterprises, Inc. (HOV) reported Wednesday a loss for the first quarter that narrowed from last year, reflecting improved margins, and strong double-digit revenue growth amid 17.4 percent increase in home deliveries. However, quarterly revenues missed analysts' expectations.
Looking ahead, the company projects a return to profitability for fiscal 2013, citing the contract backlog as well as the projected improvement in 2013 deliveries, revenues and gross margin.
The Red Bank, New Jersey-based company reported a net loss of $11.31 million or $0.08 per share for the first quarter, narrower than $18.27 million or $0.17 per share in the prior-year quarter.
The results for the latest quarter include a $9.7 million federal tax benefit, while prior-year quarter results included a net benefit of $20.1 million from gains on extinguishment of debt less expenses associated with a debt exchange offer.
On average, ten analysts polled by Thomson Reuters expected the company to report a loss of $0.10 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenues for the quarter grew 32.9 percent to $358.21 million from $269.60 million in the same quarter last year, but missed nine Wall Street analysts' consensus estimate of $381.11 million.
Total homebuilding revenues increased to $346.55 million from $262.91 million, and financial services revenues grew to $11.66 million from $6.69 million in the year-ago quarter.
Hovnanian's net contracts for the quarter, including unconsolidated joint ventures, rose 24.6 percent from last year to 1,344 homes, and dollar value of net contracts also increased 42.1 percent. Home deliveries, including unconsolidated joint ventures, increased 17.4 percent from the year-ago quarter to 1,188 homes.
Contract backlog at the end of the first quarter, including unconsolidated joint ventures, stood at $812.1 million for 2,301 homes, a year-over-year increase of 40.4 percent and 33 percent, respectively.
The contract cancellation rate, including unconsolidated joint ventures, for the first quarter was 17 percent, compared with 21 percent in last year's first quarter.
The company recorded a 170 basis points year-over-year improvement in home building gross margin to 13.9 percent and reduced its total selling, general and administrative expenses ratio by 330 basis points from last year. Home building gross margin, before interest expense, also expanded 50 basis points to 17 percent from last year.
Looking ahead to fiscal 2013, the company said it anticipates deliveries, revenues and gross margin to increase in fiscal 2013 compared with fiscal 2012, with larger improvement in these metrics expected to be seen during the second half of fiscal 2013.
"Given the size of our contract backlog, the average gross margin on homes currently in contract backlog and assuming that market conditions remain stable, we are pleased to project our return to profitability for fiscal 2013," Chairman, President and CEO Ara Hovnanian said on the outlook.
In Wednesday's regular trading session, HOV is currently trading at $5.91, down $0.19 or 3.11% on a volume of 4.24 million shares. In the past 52-week period, the stock has been trading in a range of $1.52 to $7.43.
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