Bullish indicating open at $55-$60, IPO prices at $37
Investing.com -- Shares of Hovnanian Enterprises, Inc. (NYSE:HOV) fell 3.6% despite the company reporting increased revenues and income for the fiscal 2025 first quarter. The homebuilder announced a 13% rise in total revenues and a 22% increase in income before income taxes compared to the same quarter last year.
The Matawan, New Jersey-based company saw its total revenues climb to $673.6 million, up from $594.2 million in the prior year’s first quarter. Sales of homes also grew by 12.8% to $646.9 million. Despite these gains, the company’s stock experienced a downturn, which might be attributed to concerns over declining homebuilding gross margin percentages and an increased cancellation rate.
Homebuilding gross margin percentage, after cost of sales interest expense and land charges, was reported at 15.2%, down from 18.3% in the previous year. Additionally, the gross contract cancellation rate rose to 16% from 14% in the fiscal 2024 first quarter, potentially signaling market volatility or buyer hesitation.
The company also highlighted improvements in SG&A ratio and lower interest expenses as factors that helped offset the lower gross margins. Income before income taxes saw a significant rise to $39.9 million, and net income increased to $28.2 million, or $3.58 per diluted common share.
Hovnanian’s liquidity reached the targeted range of $170 million to $245 million, and the company continued its land-light strategic focus, with 84% of its lots optioned. Looking forward, Hovnanian provided guidance for the second quarter of fiscal 2025, projecting total revenues between $675 million and $775 million and an adjusted homebuilding gross margin between 17.5% and 18.5%.
Ara K. Hovnanian, Chairman of the Board, President, and Chief Executive Officer, expressed satisfaction with the quarterly results, which met or exceeded the company’s expectations. He emphasized the company’s adaptation to market conditions and the healthy demand for its homes, despite high mortgage rates and sales volatility.
As Hovnanian navigates the current homebuilding environment, the focus remains on driving strong return on equity and investment, improving operational efficiencies, optimizing capital allocation, and maintaining disciplined cost management. The company’s strategic efforts are aimed at enhancing profitability and generating sustained returns for shareholders.
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