Hovnanian Losses Quadruple; Cash Grows

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 |  Includes: HOV, ITB, XHB
by: Judy Weil

Homebuilder Hovnanian Enterprises Inc. (NYSE:HOV) reported after-hours Tuesday that fiscal Q4 2007 losses soared to $467 million, or $7.42/share, compared with a $115.3M or $1.88/share loss in Q4 2006. Quarterly revenues fell 20% to $1.39 billion versus $1.75 in Q4 2006. Analysts had been expecting $1.32B in revenues this quarter, and losses of just $1.49/share, but an accounting charge of $54M supplanted an expected $162M accounting gain. The losses were tempered somewhat by Hovnanian's ability to generate $376M in cash from its operations, which CEO Ara K. Hovnanian said paid down more debt than projected. Hovnanian expects $100M more cash flow in the November-January period (F1 2008), and noted that the pace of sales picked up in December after a "very slow" October and November (full earnings call transcript later today).

Land impairments cost $383M this quarter. Net contracts were down 10% to 2,781, and their value sank 13.6% to $875M from $1.01B in FQ4 2006. Contract cancellation rates rose to 40% from 35% in FQ3 2007 and FQ4 2006. Annual losses amounted to $637.8M, or $10.11/share, versus profits of $138.9M, or $2.21/share last year. Revenues fell 22.4% to $4.58B from $5.9B in F2006. Hovnanian also cancelled its dividend for 2008. HOV shares rose 5.7% Tuesday during and after-hours, against a 76% haircut this year. Hovnanian's results could impact ETFs like iShares Dow Jones US Home Construction (NYSEARCA:ITB) and SPDR Homebuilders (NYSEARCA:XHB).

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