Hovnanian Shares Fall on Disappointing Results
Homebuilder Hovnanian Enterprises said late Tuesday it lost four times as much money in its fiscal fourth quarter compared to last year because of fallout from the housing downturn and an accounting charge.
It was the fifth consecutive quarterly loss for Red Bank-based Hovnanian, which operates in 19 states.
After paying preferred stock dividends, the company reported a net loss of $469.3 million, or $7.42 per share, for the quarter that ended Oct. 31. This compared with a loss of $117.9 million, or $1.88 per share, for the same period a year ago.
Hovnanian said an accounting determination resulted in a $54 million tax expense in the quarter instead of an expected $162 million benefit, for a $216 million swing.
Quarterly revenue fell 20 percent to $1.39 billion from $1.75 billion in the same period last year.
Analysts surveyed by Thomson Financial, who apparently did not factor the accounting charge, expected Hovnanian to lose $1.49 per share in the quarter on revenues of $1.32 billion.
In addition to the accounting charge, Hovnanian incurred $383 million in quarterly pretax charges for land impairments and other items. It was not known if the analysts expected that amount, said Jeffrey T. O'Keefe, Hovnanian's director of investor relations.
Shares fell 60 cents, or 7 percent, to $7.80 in early trading on the New York Stock Exchange. The stock has steadily declined from a high of $37.58 to a low of $6.75 over the past year.
Hovnanian will not pay dividends on its Series A preferred stock in fiscal 2008 because of indentures on senior and senior subordinated notes, J. Larry Sorsby, executive vice president and chief financial officer, said in a statement.
The company projected, however, that it would have more than $100 million in cash flow from operations in fiscal 2008.
"We certainly are finished with everything that we feel needed to be evaluated at this point in time," President and Chief Executive Ara K. Hovnanian told CNBC. "If the market stays in the current doldrums, we think we've accounted for everything. Obviously, if the market deteriorates more for new housing...then, as everyone has, there will be more reckoning to come."
Hovnanian and other homebuilders have been struggling amid the subprime mortgage fallout, as a record number of foreclosures has made it harder to get loans, weakening the housing market. Earlier this month, Toll Brothers Inc., the nation's largest builder of luxury homes, reported its first quarterly loss in 21 years.
Hovnanian's results came as the Commerce Department reported that construction of single-family homes in November sank to the lowest level since April 1991.
Also on Tuesday, the Federal Reserve moved to protect home buyers when they take out new loans. And the U.S. Senate on Friday approved bills that would allow more government-backed loans to borrowers with weak credit and permit homeowners to receive tax-free mortgage forgiveness from their lenders.
Contracts Drop 10%
Hovnanian said its net contracts for the fourth quarter, excluding joint ventures, fell 10 percent to 2,781. The dollar value of net contracts decreased 13.6 percent to $875 million from $1.01 billion in the year-ago quarter. Hovnanian's contract cancellation rate grew to 40 percent from 35 percent last quarter and in the fourth quarter a year ago.
For fiscal 2007, after paying preferred stock dividends, the company reported a loss of $637.8 million, or $10.11 per share, compared with a profit of $138.9 million, or $2.21 per share, for the prior fiscal year.
Annual revenue fell 22.4 percent to $4.58 billion from $5.9 billion in fiscal 2006.
Net contracts for fiscal 2007, excluding joint ventures, fell 20 percent to 11,006. The dollar value of net contracts decreased 22.6 percent to $3.84 billion from $4.97 billion last fiscal year.
CNBC.com contributed to this article.