Hovnanian Enterprises, Inc. Earnings: Will the Homebuilder Grow?

Many fear a slowdown in housing. Will Hovnanian suffer from sluggish performance?

Mar 3, 2014 at 11:11PM

Hovnanian Enterprises (NYSE:HOV) will release its quarterly report on Wednesday, and investors have had mixed views about the homebuilder's future prospects. Although the company's stock soared late last year, concerns about unseasonably cold winter weather and a corresponding drop in home sales and starts have held back its shares so far in 2014, even as rivals D.R. Horton (NYSE:DRI), Toll Brothers (NYSE:TOL), and PulteGroup (NYSE:PHM) have played catch-up lately.

Hovnanian has had to navigate a tough environment in housing lately, as fears of rising interest rates and uncertainty about how far housing prices can climb before needing to take at least a temporary break have weighed on homebuilder sentiment. Yet investors still have high hopes for Hovnanian, with expectations that the company will become consistently profitable by next quarter and produce accelerating earnings growth. Let's take an early look at what's been happening with Hovnanian Enterprises over the past quarter and what we're likely to see in its report.


Stats on Hovnanian Enterprises

Analyst EPS Estimate


Year-Ago EPS


Revenue Estimate

$404.77 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

What's next for Hovnanian Enterprises?
In recent months, analysts have had mixed views on Hovnanian earnings, keeping January-quarter estimates steady, cutting 2014 fiscal-year estimates by $0.02 per share, but boosting fiscal 2015 projections by a nickel. The stock has jumped 25% since late November.

Hovnanian produced impressive results in its October quarter, helping set the stage for a strong share-price jump following its earnings release. Revenue soared almost 22%, as Hovnanian reversed a year-ago loss with earnings of $0.21 per share. Home deliveries rose almost 4%, to more than 1,800, and backlogs stand at almost 2,400 homes, encouraging CEO Ara Hovnanian that the homebuilder could have more pricing power to boost profitability in 2014.

Hovnanian's performance has been consistent with those of other homebuilders, including Toll Brothers' 57% jump in backlogs in its most recent quarter and Lennar's (NYSE:LEN) jump of 40% in dollar-value backlog. Yet the concern that many investors have is that after such a strong 2012 and 2013, Hovnanian, Toll, Lennar, and other peers like Pulte and D.R. Horton could have trouble keeping up the pace of their growth.

We've already started to see some signs of a potential slowdown appear in the housing market. Cancellation rates have been edging higher, as rising interest rates have made it harder for many would-be homebuyers to qualify for mortgage financing. Figures for purchase-money mortgage application volumes also support the idea that the mortgage market is on shaky ground, and that in turn could make it harder for Hovnanian and its rivals to sell homes.

Most recently, poor sentiment among homebuilders has caused a big slump in confidence about the housing market's future. The poor weather was one of the major factors for the drop in sentiment, but shortages of affordable land, high-quality employees, and readily available building materials have weighed on beliefs about the future of the industry. Given the huge share-price advances that Hovnanian, D.R. Horton, and other homebuilders have seen, anything short of solid growth will likely be a painful disappointment for shareholders.

In the Hovnanian earnings report, watch to see how well the homebuilder can buck the weather trend and keep its growth story intact. If Hovnanian falls short, it could mark a key moment for the housing industry on the whole.

Make your portfolio grow
Building a great portfolio is like building a great house: it takes plenty of planning and work. But the end result can be worth it, because there's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Click here to add Hovnanian Enterprises to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers