Earnings Recap: Hovnanian Enterprises Inc. (NYSE:HOV)

Hovnanian Enterprises Inc. (NYSE:HOV) reported earnings for the three months ended April 2016 on June 02, 2016. The company earned $-0.06 per share on revenue of $654.72M. Analysts had been modeling earning per share of $0.02 with $643.06M in revenue.

Hovnanian Enterprises Inc. (NYSE:HOV) reported results for its fiscal second quarter and six months ended April 30, 2016.

RESULTS FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED APRIL 30, 2016:

  • Total revenues were $654.7 million in the second quarter of fiscal 2016, an increase of 39.6% compared with $468.9 million in the second quarter of fiscal 2015. For the six months ended April 30, 2016, total revenues increased 34.5% to $1.23 billion compared with $914.7 million in the first half of the prior year.
  • Total interest expense as a percentage of total revenues was 7.0% during the second quarter of fiscal 2016, a decrease of 50 basis points, compared with 7.5% in the same period of the previous year. For the six months ended April 30, 2016, total interest expense as a percentage of total revenues declined 100 basis points to 6.8% compared with 7.8% during the same period a year ago.
  • Total SG&A was $69.0 million, or 10.5% of total revenues, a 420 basis point improvement during the second quarter of fiscal 2016 compared with $69.1 million, or 14.7% of total revenues, in last year’s second quarter. Total SG&A was $132.8 million, or 10.8% of total revenues, a 380 basis point improvement for the first six months of fiscal 2016 compared with $133.7 million, or 14.6% of total revenues, in the first half of the prior year.
  • Homebuilding gross margin percentage, before interest expense and land charges included in cost of sales, was 16.1% for both the second quarter ended April 30, 2016 and 2015. During the first six months of fiscal 2016, homebuilding gross margin percentage, before interest expense and land charges included in cost of sales, was 16.3% compared with 17.1% in the same period of the previous year.
  • The loss before income taxes in the second quarter of fiscal 2016 was $17.6 million compared with a loss before income taxes of $29.5 million in the prior year’s second quarter. For the first half of fiscal 2016, the loss before income taxes was $30.8 million compared with a loss before income taxes of $49.2 million during the first six months of fiscal 2015.
  • The loss before income taxes, excluding land-related charges, in the second quarter of fiscal 2016 was $7.9 million compared with the loss before income taxes, excluding land-related charges, of $25.2 million in the prior year’s second quarter. For the first half of fiscal 2016, the loss before income taxes, excluding land-related charges, was $9.4 million compared with a loss before income taxes, excluding land-related charges, of $42.6 million during the first six months of fiscal 2015.
  • Net loss was $8.5 million, or $0.06 per common share, for the second quarter of fiscal 2016, compared with a net loss of $19.6 million, or $0.13 per common share, in the second quarter of the previous year. For the six months ended April 30, 2016, the net loss was $24.6 million, or $0.17 per common share, compared with a net loss of $33.9 million, or $0.23 per common share, in the first half of fiscal 2015.
  • For the second quarter of fiscal 2016, Adjusted EBITDA was $39.7 million compared with $12.2 million during the second quarter of 2015, a 224.4% increase. For the first half of fiscal 2016, Adjusted EBITDA increased 134.3% to $78.5 million compared with $33.5 million during the first six months of fiscal 2015.
  • As of April 30, 2016, consolidated active selling communities decreased 5.3% to 196 communities compared with 207 communities at the end of the prior year’s second quarter. As of end of the second quarter of fiscal 2016, active selling communities, including unconsolidated joint ventures, decreased 3.7% to 208 communities compared with 216 communities at April 30, 2015.
  • The dollar value of consolidated net contracts increased 9.6% to $768.1 million for the three months ended April 30, 2016 compared with $700.7 million during the same quarter a year ago. The dollar value of net contracts, including unconsolidated joint ventures, during the second quarter of fiscal 2016 increased 5.1% to $789.3 million compared with $750.9 million in last year’s second quarter.
  • The dollar value of consolidated net contracts increased 16.0% to $1.40 billion for the first six months of fiscal 2016 compared with $1.20 billion in the first half of the previous year. The dollar value of net contracts, including unconsolidated joint ventures, for the six months ended April 30, 2016 increased 14.6% to $1.46 billion compared with $1.27 billion in the first six months of fiscal 2015.
  • The number of consolidated net contracts, during the second quarter of fiscal 2016, increased 0.9% to 1,812 homes compared with 1,796 homes in the prior year’s second quarter. In the second quarter of fiscal 2016, the number of net contracts, including unconsolidated joint ventures, decreased 1.7% to 1,862 homes from 1,894 homes during the second quarter of fiscal 2015.
  • The number of consolidated net contracts, during the six month period ended April 30, 2016, increased 7.3% to 3,343 homes compared with 3,115 homes in the same period of the previous year. During the first half of fiscal 2016, the number of net contracts, including unconsolidated joint ventures, was 3,454 homes, an increase of 6.0% from 3,260 homes during the first six months of fiscal 2015.

Hovnanian Enterprises Inc. earnings per share showed a decreasing trend of -105.9% for the current fiscal year. The company’s expected EPS growth rate for next fiscal year is 20%.Analysts project EPS decline over the next 5 years at 0%. It has EPS annual decline over the past 5 fiscal years of -40% when sales grew 9.4. It reported 39.6% sales growth, and 56.9% EPS growth in the last quarter.

The stock is trading at $1.67, up 40.34% from 52-week low of $1.19. The stock trades down -42.61% from its peak of $2.91 and 12.57% above the consensus price target of $1.88. Its volume clocked up at 0.88 million shares which is lower than the average volume of 1.48 million shares. Its market capitalization currently stands at $239.81M.

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