Compass Point Downgrades Hovnanian Enterprises (HOV) to Neutral

Compass Point downgraded Hovnanian Enterprises (NYSE: HOV) from Buy to Neutral with a price target of $4.50.

Analyst Wilkes Graham commented, "HOV reported strong year-end earnings with 4Q14 core EPS of $0.23 versus our estimate of $0.20 and the Street's consensus of $0.21. HOV was able to reverse a portion of their DTA during the quarter ($285M), leaving only approximately $646M left to reverse in FY2015. While HOV has struggled balancing both volume and pricing in 1H14, the Company was able to push both in 4Q14 and beat the Street on both metrics while posting their first positive organic orders growth print (+3.2%) since 2Q13. Going forward, Management is focused on growing their revenues so that they will be able to leverage their fixed SG&A and interest costs, which should ultimately help them drive increased and sustainable profitability throughout 2015. HOV continues to believe that the housing industry remains in the early stages of a recovery, though improving demographic and employment trends should result in a more robust housing market that should return both housing starts and sales pace per community to normalized levels throughout 2015E. However, with the stock up +37% since our October 13th upgrade, or more than double the amount the rest of our coverage (up 16% on average), we believe the stock is fairly valued at these levels and are downgrading it to Neutral from Buy."

The firm is lowering 2015 EPS estimate to $0.37 from $0.41 and introducing 2016 EPS estimate of $0.57.

For an analyst ratings summary and ratings history on Hovnanian Enterprises click here. For more ratings news on Hovnanian Enterprises click here.

Shares of Hovnanian Enterprises closed at $4.29 yesterday.

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