CORRECTED-Homebuilder Hovnanian Enterprises Q3 revenue rises 10.8% on strong home sales growth

Overview

• Hovnanian Q3 fiscal revenue rises 10.8% to $800.6 mln, just missing estimates

• Net income for fiscal Q3 falls to $16.6 mln from $72.9 mln a year ago

• 86% of total lots are optioned, highest percentage ever achieved

Outlook

• Company expects Q4 revenue between $750 mln and $850 mln

• Hovnanian sees Q4 adjusted homebuilding gross margin at 15%-16.5%

• Company anticipates Q4 adjusted EBITDA between $77 mln and $87 mln

• Hovnanian projects Q4 adjusted income before taxes of $45 mln-$55 mln

Result Drivers

• REVENUE INCREASE - Total revenues rose 10.8% to $800.6 mln in Q3, driven by a 9.3% increase in domestic unconsolidated joint ventures' home sales revenues to $165.0 mln

• GROSS MARGIN DECLINE - Homebuilding gross margin percentage, after cost of sales interest expense and land charges, decreased to 11.7% from 19.1% a year ago, with a noted increase in land charges from 0.1% to 2.1%

• CONTRACTS GROWTH - Consolidated contracts in Q3 increased 1.6% to 1,211 homes, while contracts including domestic unconsolidated joint ventures rose 1.4% to 1,416 homes

Key Details

Analyst Coverage

• The one available analyst rating on the shares is "hold"

• The average consensus recommendation for the homebuilding peer group is "hold"

• Wall Street's median 12-month price target for Hovnanian Enterprises Inc is $120.00, about 24.1% below its August 20 closing price of $148.95

Press Release: ID:nGNX5c76LM