Hovnanian Reports Profit as Home Sales and Orders Climb
Hovnanian Enterprises Inc., the best-performing U.S. homebuilder stock in the past year, rose the most in almost three months after reporting a surprise quarterly profit as it benefited from the U.S. housing recovery.
Net income for the fiscal second quarter ended April 30 was $1.3 million, or 1 cent a share, compared with $1.8 million, or 2 cents, a year earlier, the Red Bank, New Jersey-based company said today in a statement. The average of nine analyst estimates was for a loss of 5 cents a share, according to data compiled by Bloomberg.
Hovnanian, the largest homebuilder in New Jersey, has been working to reduce costs and add more communities to benefit from the recovery. A tight inventory of previously owned properties has boosted demand for new houses. Purchases of new homes advanced 2.3 percent in April to a 454,000 annual pace, the second-fastest since July 2008, Commerce Department data show.
“Throughout the spring selling season, our communities experienced strong demand,” Chief Executive Officer Ara Hovnanian said in the statement. “We raised home prices in many of our communities across the country, which have more than offset any increases in labor or material costs we have experienced to date.”
Hovnanian climbed 5.7 percent to $6.31 at 10 a.m. in New York, the biggest gain in the 13-company Bloomberg Industries homebuilding index. It earlier rose to $6.40, the highest intraday price since March 19. The stock has jumped 271 percent in the 12 months through yesterday, compared with a 96 percent advance for the index.
Revenue increased to $423 million in the quarter from $341.7 million a year earlier. Net contracts climbed 9.9 percent to 1,950 homes. Hovnanian’s contract backlog, an indication of future sales, rose 23 percent to 2,827 homes.
Hovnanian will be profitable for fiscal 2013, excluding any early retirement of debt, the CEO said. The builder has suffered from relatively high borrowing expenses, preventing consistent profitability and limiting its ability to replenish land as sales improve.
Toll Brothers Inc., the largest U.S. luxury-home builder, last month reported quarterly earnings that beat estimates and the most orders since 2006.
“Hovnanian continues to trail the pace of recovery for the group,” Vicki Bryan, an analyst at New York-based debt researcher Gimme Credit LLC, said before the results were released. “They’re being pulled higher by the general improvement in the new-home market but they’re struggling for average.”
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