Hovnanian Beats Q1 Targets, Eyes Saudi Growth and Stronger Second Half

MATAWAN, NJ – February 25, 2026 – Hovnanian Enterprises, Inc. (NYSE: HOV) announced first-quarter fiscal 2026 results that surpassed its own guidance, signaling operational resilience in a housing market strained by high interest rates and cautious buyers. While revenue and net income saw year-over-year declines, the national homebuilder pointed to strengthening contract activity in early 2026 and a significant strategic expansion into the Kingdom of Saudi Arabia as pillars for future growth.

For the quarter ending January 31, 2026, Hovnanian reported total revenues of $632.0 million, down from $673.6 million in the prior-year period. Net income stood at $20.9 million, or $2.62 per diluted share, compared to $28.2 million, or $3.58 per share, a year ago. Despite the drop, these figures met or exceeded the company's targets, a feat management attributed to a disciplined operating model.

“Even with a challenging sales environment this quarter, related to cautious homebuyers and ongoing global uncertainties, I am satisfied to report that our team successfully met or exceeded all aspects of our guidance,” said Ara K. Hovnanian, Chairman and CEO, in the company's earnings release. “Our strong operating model and disciplined approach allowed us to stay focused on sales pace and adapt quickly to changing conditions.”

Navigating a Cautious Market

The homebuilding industry continues to grapple with significant headwinds. Mortgage rates, which are forecast to hover around 6% for much of 2026, have severely impacted affordability. This has created a class of “cautious homebuyers” who possess more negotiating power than in previous years, forcing builders to compete on price and incentives. Hovnanian’s results reflect this reality, with its homebuilding gross margin falling to 10.1% from 15.2% in the first quarter of last year. The company's adjusted gross margin of 13.4%, while within guidance, trails larger competitors like Lennar and Toll Brothers, who reported margins of 17% and 27.1% respectively in their most recent comparable quarters.

However, Hovnanian is leveraging key strategies to maintain stability. A cornerstone of this approach is its “land-light” strategy. As of the quarter's end, a remarkable 86% of the company's 35,560 domestic lots were controlled through options rather than outright ownership. This approach significantly reduces capital risk, freeing up cash and providing the flexibility to walk away from land deals if market conditions sour. This discipline is reflected in the company's robust balance sheet, which boasts $471.4 million in total liquidity—far exceeding its target range of $170 million to $245 million.

Further evidence of momentum comes from recent sales activity. While contracts for the full quarter were down slightly, the company saw a notable rebound at the start of the spring selling season. Domestic contracts, including joint ventures, jumped 11.3% in January and 13.1% month-to-date in February compared to the same periods in 2025, suggesting that its product and pricing are resonating with buyers despite the challenging environment.

A Global Pivot to Saudi Arabia

Perhaps the most significant long-term development in the quarter was Hovnanian's strategic consolidation of its joint venture in the Kingdom of Saudi Arabia (KSA). By acquiring a controlling interest, the company has officially integrated its Saudi operations into its consolidated financial results, marking a major international expansion.

This move positions Hovnanian to capitalize on Saudi Arabia's ambitious Vision 2030 plan, a nationwide initiative aimed at diversifying the economy and boosting homeownership to 70%. The Saudi real estate market is forecast to grow from approximately $77 billion in 2025 to over $137 billion by 2034, fueled by massive government investment in housing and infrastructure. Recent reforms, which took effect in January 2026, now permit foreign ownership of real estate, a change expected to unlock significant international capital.

The consolidation immediately added a backlog of 746 homes valued at $181.5 million to Hovnanian's books, providing a new, diversified revenue stream outside the cyclical U.S. market. This strategic entry into a high-growth region offers a substantial long-term opportunity that complements its domestic operations.

The Road to a Stronger Second Half

While celebrating its Q1 performance, Hovnanian's management provided cautious guidance for the second quarter, projecting adjusted income before income taxes to be between breakeven and $10 million. Mr. Hovnanian stated, “Although we are not satisfied with our projected profits for the second quarter, we anticipate our adjusted income before income taxes to increase in the second half of fiscal 2026, weighted towards the fourth quarter.”

This projected back-half recovery is not based on hope alone. The company has a clear plan to improve profitability by shifting its delivery mix. Management expects to deliver more homes from “newer, higher-margin communities” later in the year. Furthermore, an anticipated increase in sales of higher-margined to-be-built homes, as opposed to quick move-in inventory, is expected to bolster profits.

This strategy aligns with the fundamental dynamics of the U.S. housing market. Despite near-term affordability challenges, the industry is supported by powerful long-term tailwinds, including a structural housing shortage estimated at over one million units and strong demographic demand from the millennial generation.

“Looking ahead, the long-term outlook for the homebuilding industry remains compelling,” Mr. Hovnanian concluded. “We are confident that our strategy and operational excellence will enable us to capitalize on opportunities as the housing market evolves.” As the company moves through 2026, it will balance its disciplined management of the domestic market with its ambitious new foothold in the Middle East, charting a dual path toward future growth.