Even though there have been more closings for Hovnanian Enterprises (NYSE:HOV), Barclays (NYSE:BCS) doesn't see them being profitable in 2011, citing large and increasing debt.
Barclays said, "Despite most F4Q10 core operating metrics (impairments the key exception) either in-line or better than our estimates, HOV underperformed the group yesterday, falling 2.5% vs. the group's +2.6% and S&P's +0.3%. We attribute the decline to the following concerns: 1) despite an increasing proportion of closings coming from recently acquired communities in FY11, profitability in the coming year remains very unlikely, in our view; and 2) management's commitment to aggressive land acquisition despite the leveraged nature of the company's balance sheet. Further, CEO Ara Hovnanian indicated that given the right opportunity, HOV would consider issuing equity. We are lowering our F1Q11 and FY11 EPS estimates to ($0.83) and ($2.41) from prior ($0.71) and ($1.91), respectively, and we reiterate our rating on the shares."
Barclays maintains an "Underweight" on Hovnanian Enterprise, which last closed at $4.03, down $0.22, or 5.18 percent. Barclays has a price target of $2 on them.
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