Hovnanian Enterprises (HOV): Shares cycle through positive trading channel

Filed under: Earnings reports, Technical Analysis, Stocks to Buy

Hovnanian Enterprises (NYSE: HOV) is a major U.S. homebuilder. The firm designs and constructs single-family detached homes, attached townhomes and condominiums, mid-rise and high-rise condominiums, urban infill, and active adult homes. It targets first-time buyers, move-up buyers, luxury buyers, active adult buyers, and empty nesters. The company operates in 19 states, primarily along the East Coast and in the Midwest, California, and Texas. Hovnanian also offers mortgage financing and title services.

Investors were relieved last month, when the company reported a Q1 loss of $2.07 per share and revenues of $1.09 billion. On average, the Street had been looking for a loss of $1.96 per share and revenues of $911.4 million. Management admitted that the housing market remains challenging, but it continued to project positive cash flow from operations in excess of $100 million for FY08. Fitch Ratings subsequently upgraded its view of the homebuilder's revolving credit facility, saying the recovery prospects were "outstanding." The change to "BB-/RR1" from "B-/RR4" came, after Hovnanian reduced its credit facility from $1.2 billion to $900 million.

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