UPDATE: Compass Point Downgrades Hovnanian Enterprises, Says Stock Is Fairly Valued

Compass Point downgraded Hovnanian Enterprises, Inc. HOV Friday from Buy to Neutral and maintained a $4.50 price target.

Analyst Wilkes Graham noted that “with the stock up +37 percent since our October 13th upgrade, or more than double the amount the rest of our coverage (up 16 percent on average), we believe the stock is fairly valued at these levels.”

“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 percent) since 2Q13,” according to Graham.

The analyst note concluded, “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.”

Hovnanian Enterprises traded in the premarket at $4.21, down 1.86 percent.