Hovnanian reports deeper quarterly loss
NEW YORK (Reuters) - Hovnanian Enterprises Inc (HOV.N) reported a deeper quarterly loss that lagged Wall Street estimates, hurt by record foreclosures and poor consumer confidence, sending its shares down more than 4 percent.
The No. 6 U.S. builder reported on Wednesday a $202.5 million loss, or $2.67 per share, compared with a loss of $80.5 million, or $1.27 per share, in the year-ago third quarter.
Analysts had predicted a loss of $1.68 per share, according to the average on Reuters Estimates.
As the worst U.S. housing slump in decades grinds on into its third year, homes for sale continue to accumulate despite falling prices. Builders such as Tousa Inc, Levitt & Sons and WCI Communities Inc WCIMQ.PK have declared bankruptcy while the survivors have had to mark down the value of their assets.
Hovnanian said the third quarter included pre-tax charges of $111.7 million for the lower value of land and inventory, and other items.
Sales fell to $716.5 million from $1.1 billion a year ago as contracts, excluding unconsolidated joint ventures, fell 38 percent to 1,584 homes, and would-be buyers canceled contracts at a 32 percent rate.
The Red Bank, New Jersey-based company's sales nonetheless topped the average analyst estimate of $700.4 million.
Last week, the National Association of Realtors reported that while the median national home price is down 7.1 percent from a year ago at $212,400, inventories continue to rise.
In response to the deteriorating market, builders have shifted their focus to cash generation by ramping up incentives and selling the land and inventory they accumulated at peak prices during boom times. Hovnanian has chopped its supply of lots down to 46,682, 62 percent below its peak in April 2006.
The company generated $192.2 million in cash in the third quarter, of which $94.7 million was a federal tax refund.
Hovnanian had positive cash flow in its second quarter as well, but its operating margin was low compared with rivals as the company has been forced to subordinate profitability to cash flow, UBS analyst David Goldberg wrote in a note to clients.
"We remain focused on generating sufficient liquidity to both weather this housing downturn and to take advantage of opportunities at the bottom of this housing cycle," Chief Executive Ara Hovnanian said in a statement.
Hovnanian's third-quarter gross margin before interest expense was 8.5 percent, up from 6.8 percent in the second quarter, but down from 15.9 percent last year.
Its shares fell to $7.40 in extended trade from a $7.75 close, reversing its gain during regular trade.
(Reporting by Helen Chernikoff; Editing by Richard Chang and Braden Reddall)
