Hovnanian Misses Profit, Revenue Estimates, but Sticks With Guidance

Hovnanian Enterprises Inc. (NYSE: HOV) reported first-quarter fiscal 2016 results before markets opened Wednesday. The homebuilder posted a quarterly diluted per share net loss of $0.11 on revenues of $575.6 million. In the same period a year ago, Hovnanian reported a net loss per share of $0.10 on revenue of $445.71 million. First-quarter results also compare to the Thomson Reuters consensus estimates for a net loss of $0.03 per share and $580.31 million in revenue.

The pretax loss, excluding land-related charges, in the first quarter, totaled $1.5 million, compared with $17.5 million in the prior year’s first quarter. The net loss totaled $16.2 million, including land-related charges of $11.7 million primarily attributable to land held for sale in Minnesota, a market that Hovnanian is leaving.

Gross margin slipped from 18.2% in the year-ago quarter to 16.6% in the first quarter, and adjusted EBITDA rose 82.5% year over year to $38.8 million.
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The company’s CEO, Ara K. Hovnanian, said:

Rather than focusing on additional revenue growth beyond 2016, we now plan to focus on deleveraging our balance sheet and maximizing our profitability. As part of this strategy we have decided to exit the Minneapolis, MN and Raleigh, NC markets. Additionally, we plan to wind down our operations in Tampa, FL and the San Francisco Bay Area in Northern California by delivering the remaining homes in our existing communities.

The company reiterated full-year 2016 guidance for revenues of $2.7 billion to $3.1 billion and pretax profit excluding certain items of $40 million to $100 million.

Shares traded down about 4.5% Wednesday morning to $1.68, in a 52-week range of $1.19 to $3.76. Thomson Reuters had a consensus analyst price target of $2.33 before the results were announced.