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Hovnanian Reports Unexpected Profit as Home Orders Surge

June 6 (Bloomberg) -- Hovnanian Enterprises Inc., the largest homebuilder in New Jersey, reported an unexpected profit for its fiscal second quarter as orders jumped 52 percent amid rising U.S. demand for new houses. The shares surged.

Net income for the three months ended April 30 was $1.8 million, or 2 cents a share, compared with a loss of $72.7 million, or 69 cents, a year earlier, the Red Bank-based company said today in a statement. The average estimate of nine analysts surveyed by Bloomberg was for a loss of 32 cents a share.

The profit was Hovnanian’s first after eight straight quarters of losses. U.S. homebuilders are reporting increased orders as job gains and record-low mortgage rates help lure buyers. Purchases of new homes in the U.S. rose 3.3 percent in April from the previous month to an annual pace of 343,000, the Commerce Department said May 23.

Hovnanian is “benefiting from the overall lift in the housing market, Megan McGrath, an analyst at MKM Partners LLC in Stamford, Connecticut, said in a telephone interview. ‘‘It was a good quarter. They beat us fair and square.’’

She has a sell rating on the shares.

Hovnanian’s net contracts for the quarter jumped to 1,775 homes from 1,166 a year earlier, the company said. Revenue increased 34 percent to $341.7 million.

Contract Backlog

The builder’s contract backlog, an indication of future sales, rose 48 percent from a year earlier to 2,298 homes. The cancellation rate was 17 percent, down from 20 percent in the second quarter of 2011.

Chief Executive Officer Ara Hovnanian said the company was able to increase prices or reduce incentives in about 40 percent of its communities during the first half of fiscal 2012.

‘‘As our sales pace is increased, we have tested pricing increases,” he said during a conference call with investors. “We’ve been gradually increasing prices because the last thing we want to do is push prices too far and slow down our sales pace.”

The stock gained 18 percent to $2.01 at the close in New York. It was the best performance in Bloomberg’s 13-member homebuilder index, which rose 5 percent.

To contact the reporter on this story: Prashant Gopal in New York at pgopal2@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

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