Hovnanian reports Q2 EPS $2.43 vs. $6.66 last year

Reports Q2 revenue $686.5M vs. $708.4M last year. “We are pleased to have achieved most of our financial guidance for the quarter. In addition, our hard work over the last few years to significantly improve our balance sheet by reducing debt and increasing equity, as well as increasing our land position by almost 50% since the second quarter of fiscal 2023, allows us multiple opportunities in this market. Because of this increased lot count, over time, we could grow revenues significantly if stronger demand returns. If we do not grow as significantly, we anticipate that we will generate cash flow to continue to pay down debt – we reduced debt $742M from the end of fiscal 2019 – or repurchase more of our stock to add to the 877,657 shares we have repurchased in the last three and a half years,” stated Ara Hovnanian (HOV), CEO. “While our contract pace per community is consistent with historical averages, it remains lower than in recent years. Further, our gross margins, ignoring mortgage rate incentives, are actually quite strong; however, offering mortgage rate buydowns is expensive and has adversely impacted our gross margins. We have reviewed all land transactions to ensure that they remain economically viable. This resulted in walking away from a few land option positions during due diligence that no longer met our return hurdles. In this more challenging environment, we are working with some of our land sellers currently under option agreements to find solutions that work for both parties. To clear the way for recent land acquisitions which meet our historical return metrics, we have made a strategic decision to burn through certain less profitable land parcels at lower gross margins. Fortunately, we are finding plenty of new land opportunities that meet our return hurdles even with the current level of incentives and sales pace. In spite of the difficult current environment, we are pleased to have the second highest ROE and believe we have the highest adjusted EBIT ROI on a trailing twelve-month basis among the midsized homebuilders.”