Please ensure Javascript is enabled for purposes of website accessibility

Instant Analysis: Hovnanian Enterprises Misses on Q1 Revenue, EPS

By Eric Volkman – Mar 11, 2016 at 4:05PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The home builder posts a deepening, and deeper-than-expected, net loss for the period.

What happened?
Home builder Hovnanian Enterprises (HOV -1.00%) has had a tough time of it lately. In its most recent negative development, the company delivered a Q1 that came in well under expectations.

This was in spite of the fact that its revenue grew by 29% on a year-over-year basis to $576 million. The bottom line went in the opposite direction, though, with net loss deepening to more than $16 million ($0.11 per diluted share), from Q1 2015's $14 million.

Image source: Paul Brennan via PublicDomainPictures.net

On average, analysts anticipated that Hovnanian would post revenue of $580 million and a net loss of $0.03 per share.

The company has elected to retreat from some markets, such as San Francisco, following "much analysis of our more challenging divisions and our desire to be a more significant player in our markets with better performance," CEO Ara Hovnanian said on the conference call. Charges related to the company's exit from the Minnesota market amounted to nearly $12 million during the quarter.

Does it matter?
Those charges made a big difference; without them, Hovnanian's loss would have been $1.5 million, a big improvement over the year-ago quarter's adjusted $17.5 million bottom-line shortfall.

Still, the company booked a loss. Home building is expensive, no matter how otherwise successful the economy, and Hovnanian is struggling with its finances. Although it's managed to reduce its indebtedness some, its long-term borrowings still approach the $2 billion level; its revenue for the entirety of fiscal 2015, meanwhile, was just over that mark.

Investors are not going to like having to swallow another net loss -- the company's fourth in the last five quarters. And although it's actually a positive development, the market won't look kindly on Hovnanian's retreat from markets that are lucrative for others. We can expect the company's stock to take a hit from this unhappy set of figures.

Eric Volkman has no position in any stocks mentioned. Nor does The Motley Fool. 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Hovnanian Enterprises Stock Quote
Hovnanian Enterprises
HOV
$45.63 (-1.00%) $0.46

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.