By JOHN KELL, Wall Street Journal, March 2, 2010
Hovnanian Enterprises Inc. swung to a fiscal first-quarter profit as the company became the latest home builder to benefit from a federal tax credit while reporting fewer write-downs and its lowest cancellation rate since 2005.
Shares of Hovnanian, which ended a streak of 13 consecutive quarters in the red, were up 3.3% at $4.08 in after-hours trading.
Hovnanian has been hit harder than most of its peers by the worst industry downturn in generations. Meanwhile, Hovnanian’s heavy debt load is leaving it unable to fully take advantage of lower land prices, potentially leaving it behind when home construction rises. But the company, based in Red Bank, N.J., reported its owned land position increased by about 1,000 lots during the quarter.
Several home builders of late have returned to profitability on the back of tax benefits, with Hovnanian reporting a gain of $291.3 million in the latest quarter. But signs of the housing market’s recovery have been uneven in recent months, although many builders are becoming more optimistic amid low rates and a federal tax credit.
For the quarter ended Jan. 31, Hovnanian posted a profit of $236.2 million, or $2.97 a share, compared with a year-earlier loss of $178.4 million, or $2.29 a share. The latest results included $5 million in write-downs on land and other items, compared with $132 million in write-downs a year earlier.
Revenue slid 14% to $319.6 million.
Analysts surveyed by Thomson Reuters expected a loss of 46 cents a share on revenue of $321 million.
Hovnanian, which operates in 18 states, including hard-hit California, Arizona and Florida, said net contracts excluding unconsolidated joint ventures decreased 5%. The average price grew 14%.
The company’s contract backlog as of Jan. 31 was 1,593 homes, down 4%, with a sales value of $505.4 million. The cancellation rate dropped to 21% from 31%, and was the company’s lowest cancellation rate since the second quarter of 2005.
Write to John Kell at john.kell@dowjones.com
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