Red Bank, NJ, June 1, 2007--After three consecutive quarters of losses, luxury homebuilder Hovnanian Enterprises says better management of its land inventory should allow the company to post a profit in the fourth quarter and for 2008.
The company reported a loss in the second quarter of $30.7 million, or $0.49 per share, for the three months ended April 30, after paying preferred stock dividends. That compared with a profit of $101 million, or $1.55 per share, in the same period a year ago.
Analysts were expecting Hovnanian to lose 48 cents per share.
Revenue in the quarter was $1.1 billion, down 29 percent from $1.6 billion in the same period a year ago.
The company builds luxury homes in 17 states including California, Florida, New Jersey and New York.
"We are frustrated to report that the housing market has continued to slip further in many locations in terms of both sales pace and sales prices," said Ara K. Hovnanian, the company's president and chief executive, who will address analysts in a conference call Friday.
"The housing market weakened in the latter part of the second quarter, and the slower conditions have continued into May," he said.
The company also announced it will stop offering earnings guidance because of the uncertainty of the housing market.
Despite a 3 percent increase in February contracts over last year, net contracts declined by about 30 percent through March and April, Hovnanian said, blaming some of the downturn on the subprime mortgage market.
The company delivered 275 homes through unconsolidated joint ventures, compared with 612 homes in the second quarter of 2006.
For 2007, Hovnanian expects to deliver between 13,200 and 14,200 houses, excluding deliveries from unconsolidated joint ventures.
The company reported significant sales increases in the San Diego and Minnesota markets, which had experienced substantial slowdowns over the past year.
Also Thursday, Moody's Investors Services cut its ratings on Hovnanian, saying the homebuilder's cash flow from operations will likely remain negative amid the ongoing housing-sector slump. Standard & Poor's Ratings Services cut its outlook for the company last week.
Moody's lowered its corporate family and senior notes ratings one level to "Ba3," leaving it three levels below investment grade. It lowered ratings on the subordinated notes and trust preferred stock one level to "B2."
