Homebuilder Hovnanian Enterprises Inc. (NYSE: HOV)
, today, reported a surprise third-quarter profit, driven by a rise in revenue and a tax gain.
HOV reported a profit of $34.7 million, or $0.25 per share for the third quarter ended July 31. This compares to a loss of $50.9 million, or $0.47 per share the company reported in the same period last year. HOV’s third-quarter results benefited from a $36.5 million tax gain.
Analysts had forecast the homebuilder to report a loss of $0.14 per share for the third quarter.
HOV’s revenue for the quarter rose 35% to $387 million, missing Street estimates of $413.2 million.
Hovnanian noted that demand for new homes was resilient through the spring and summer months despite the weakness in the U.S. economy. HOV’s results further confirm the fact that the housing market is seeing a recovery. Other homebuilders such as KB Home (NYSE: KBH), Lennar Corporation (NYSE: LEN) and D.R. Horton Inc. (NYSE: DHI) also saw improvements in their most recent quarterly results.
HOV reported that the dollar value of its net contracts jumped 32% to $507 million in the second quarter. Meanwhile, the number of net contracts climbed 19% to 1,541 homes. Deliveries climbed 25% to 1,387 homes.
Ara K. Hovnanian, Chairman, President and CEO of Hovnanian Enterprises, said that HOV believes the housing market’s overall strength, and the company’s significantly improved sales pace this year indicates that the market for new homes has bounced off the bottom and is already in a period of gradual recovery. Hovnanian added that the company is encouraged with progress it has made in its operating metrics, particularly with the 290 basis point year-over-year improvement in gross margin.
Despite swinging to a profit in the third quarter, HOV shares slipped in trading today. At last check, HOV shares were down 2.80% to $3.12 on above average volume of 9.37 million.
HOV and other homebuilders have had a tremendous run this year. Year-to-date, HOV shares have gained more than 115%, KBH shares have gained more than 76%, LEN shares have gained more than 73%, and DHI shares have gained more than 58%. The performance of homebuilders this year reflects the improvement in the housing market.