What: Shares of Hovnanian Enterprises (NYSE:HOV) fell 18% in June, according to data from S&P Capital IQ. That decline worsened losses from earlier in the year, and the struggling homebuilder's stock is now down nearly 40% in 2015.
So what: Hovnanian Enterprises' stock-price descent accelerated after it reported a quarterly loss far worse than Wall Street's expectations. Second-quarter revenue rose 4.2%, to $468.9 million, well below analysts' estimates of $535 million. Hurt by the larger-than-expected impact of incentives and concessions on unsold homes, gross margin fell to 16.1%, down from 20.2% in the prior-year quarter. All told, Hovnanian's net loss of $0.13 per share was more than double the $0.06 that Wall Street was expecting. Worse still, management is now projecting a loss for the year.
Now what: Even with Hovnanian' stock trading near 52-week lows, investors may be better served by looking elsewhere when looking for bargains in the housing sector. While it's true that homebuilders' confidence readings are improving, and home-sales figures are showing signs of a strengthening housing market, better investment options exist.
Toll Brothers isone of the strongest homebuilders. Its focus on the luxury market and compelling valuation make it an interesting value stock to consider.
For a broader play on a recovering housing market, Fools may wish to take a look at Home Depot. The home improvement retail titan has been a star performer, and offers investors a way to profit from renovations to existing homes, as well as new-home sales.
Joe Tenebruso has no position in any stocks mentioned. The Motley Fool recommends Home Depot. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.