(By Salman - iStockAnalyst Writer)Hovnanian Enterprises Inc. (NYSE:
HOV), a leading national homebuilder, is scheduled to release financial results for the fiscal third quarter ended July 31, 2009 after market close on Wednesday, September 2, 2009. Analysts on average expect the company to report a loss of $1.52 on revenue of $392.18 million. In the year ago quarter, the company reported a loss of $2.67 per share on revenue of $0.71 billion.
Hovnanian Enterprises, Inc. engages in homebuilding and financial services businesses in the United States. The company designs, constructs, markets, and sells single-family detached homes, attached town homes and condominiums, mid-rise and high-rise condominiums, urban infill, and active adult homes. It markets and builds homes for first-time buyers, first-time and second-time move-up buyers, luxury buyers, active adult buyers, and empty nesters. The company offers homes for sale in 284 communities in 44 markets in 18 states in the United States. It also provides various financial services, including originating mortgages from home buyers, and title insurance activities.
The Red Bank, New Jersey based-company's second quarter net loss narrowed to $118.6 million or $1.50 per share, compared to a net loss of $340.7 million, or $5.29 per share, in the prior year quarter. Quarterly revenue plunged 49% to $398.00 million from $776.44 million in the same quarter last year. Analysts on average expected the company to report a loss of $1.26 per share on revenue of $347.68 million. The homebuilders contract cancellation rate for the second quarter was 24%, compared to 29% in last year's second quarter of last year and 31% in the first quarter of fiscal 2009.
However, recent macroeconomic indicators have pointed to a relative stabilization in the housing market. Recession has dealt a severe blow to the home-building sector and new construction is far below the rate needed for normal population growth and replacement of older homes. Job losses appear to be moderating, consumer spending is up, if only slightly, and manufacturing and other industrial data have provided encouragement. The massive drop in prices, federal incentives for buyers and relatively low borrowing are making housing more affordable. According to Department of Commerce, sales of new homes rose by the fastest pace in over four years to a seasonally adjusted annual rate of 433,000 units, well above the 390,000 rate economists were expecting. New home sales were up 32% in Northeast where Hovnanian has considerable exposure. Additionally, the National Association of Realtors said that the pending home sales rose for the fifth consecutive month in June, providing the housing market yet another sign that U.S. real estate is beginning to bottom out or possibly recover. Moreover, US house prices are finally rising after nearly three years of traumatic decline. According to S&P Case-Shiller U.S. National Home Price Index posted its first quarterly increase in three years in the second quarter.
The company has been cutting costs aggressively. It has slashed selling, general and administrative expenses, including corporate general and administrative expenses, to $165.3 million from $625.2 million in fiscal 2007 to $459.9 million in fiscal 2008 due in large part to a 59% reduction in head count. As of April 30, 2009 its headcount reduction since peak was 71%. For the six months ended April 30, 2009, homebuilding selling, general and administrative costs declined 33.3% to $131.9 million compared to the six months ended April 30, 2008.
In terms of stock performance, Hovnanian shares are up 235% since the beginning of the year. Shares of the company fell 23 cents or 4.10% to $5.38 in morning trade on Monday.
Disclosure: Author doesn’t own any of the stocks discussed here.
