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Hovnanian Backs Profit Guidance

The value of contracts signed in the first quarter rose 22%.
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backed first-quarter profit guidance Wednesday and said the value of contracts signed in the period rose 22% from a year ago.

The homebuilder expects to match or slightly exceed its previous first-quarter profit forecast, which called for earnings of $1.10 to $1.25 a share. Analysts surveyed by Thomson First Call were forecasting a profit of $1.22 a share.

Hovnanian said the dollar value of net contracts rose 22% to $1.26 billion in the first quarter, while the number of contracts rose 11.9% to 3,624. The company got an average price of $348,297 in the quarter, up 9% from last year. The sales value of its backlog was $4.93 billion at Jan. 31, 2006, up 81.7% from a year ago.

While the strong contract and backlog should cheer homebuilder bulls who were tripped up by

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, Hovnanian also tempered expectations on several fronts.

"Despite solid growth in net contracts for the quarter, the company stated that many of its more highly regulated markets, including California, Florida, Washington, D.C., and the Northeast, continued to experience a more normalized level of activity during the quarter with regard to both sales pace and price increases, similar to the market conditions that the company reported in December with its year-end earnings release," Hovnanian said. "Market conditions remain somewhat slower than the very strong sales environment experienced in these markets earlier in 2005 and 2004."

The stock closed at $46.05 Tuesday, about 5.4 times the Thomson First Call consensus earnings estimate of $8.58 a share for the year ending next January. The stock is down 7% in 2006, down 7% since the start of 2005 and is up 11% since the start of 2004.