DOW JONES NEWSWIRES
Hovnanian Enterprises Inc.'s (HOV) fiscal second-quarter loss narrowed more than expected, although revenue was more tepid than analysts were anticipating.
The home builder's cancellation rate continued to drop, falling to its lowest level in years, and home-builder gross margin improved sharply. But net contracts dropped and prices still slid modestly.
Chairman and Chief Executive Ara K. Hovnanian speculated that the expiration of a federal tax credit for first-time home buyers at the end of April may indeed have pulled forward some sales from the future, as the company saw the pace of net contracts slow in May.
Although builders have recently been reporting improved results, they remain challenged by high unemployment, the expiration of credit and the threat of more foreclosures. Hovnanian was hurt worse than most of its peers during the housing downturn, and its large debt load has limited its capability to seize cheap land-purchasing opportunities.
"Nonetheless, we see more positive signs today than negative," Hovnanian said.
For the quarter ended April 30, the company posted a loss of $28.6 million, or 36 cents a share, from $118.6 million, or $1.50 a share, a year earlier. The latest results included $1.2 million of land impairments, while the previous year's results included $310.2 million in write-downs on land and other items. However, the previous year included a much larger gain on extinguishing debt than the most recent period.
Revenue dropped 20% to $318.6 million.
Analysts surveyed by Thomson Reuters anticipated a 64-cent loss on $352 million in revenue.
Home-building gross margin rose to 17.3%, from 8.3% a year earlier and 16% in the previous quarter. The cancellation rate continued to fall, dropping to 17%, from 24% last year.
But Hovnanian said net contracts excluding unconsolidated joint ventures fell 17%. The average home price fell 5.4%.
The company's contract backlog as of April 30 was 1,789 homes, down 4%, with a sales value of $534.6 million.
In April, Hovnanian agreed to pay the government $1 million to settle a lawsuit alleging it violated the Clean Water Act at hundreds of construction sites. Investors, relieved the suit was over and the settlement wasn't higher, pushed the company's stock higher.
Hovnanian shares were unchanged at $6.15 after hours. The stock has doubled in value over the last year.
-By Joan E. Solsman, Dow Jones Newswires; 212-416-2291; email@example.com