Hovnanian Profit Slumps 76%

Hovnanian Enterprises Inc.'s (HOV) fiscal third-quarter earnings fell 76% as the home builder's improved revenue and margins were overshadowed by a year-earlier period that included a combined $42.7 million in tax benefits and debt-extinguishment gains.

The company, like other U.S. home builders, has mostly seen more-solid results lately as the housing market recovers from the worst downturn in generations.

"Our emphasis on raising home prices combined with concerns over rising mortgage rates and weakened consumer confidence dampened our home sales during July and August," Chief Executive Ara K. Hovnanian said. "We believe we are in a period where consumers are adjusting to current home prices and mortgage rates and remain confident that the combination of pent-up housing demand and the positive long-term demographic trends for housing will drive increased demand for new homes going forward."

For the period ended July 31, Hovnanian reported a profit of $8.5 million, or six cents a share, down from $34.7 million, or 25 cents a share, a year earlier. The year-earlier period included a $36.5 million income tax benefit and $6.2 million in debt-extinguishment gains.

Revenue jumped 24% to $478.4 million.

Analysts polled by Thomson Reuters recently expected per-share earnings of seven cents and revenue of $505 million.

Adjusted home-building gross margin rose to 20.3% from 18.2%.

In the latest quarter, net contracts were up 1.8% to 1,568 homes, while the dollar value grew 7.9% to $546.9 million. Deliveries rose 8.3% to 1,502 homes.

As of quarter's end, Hovanian's contract backlog was up 18% at 2,893 homes.

Shortly after the market opened, shares of Hovnanian rose two cents to $5.06. Through Friday's close, the stock is down 28% this year.

Write to Tess Stynes at [e-mail]

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