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PulteGroup is one of the largest homebuilders in the U.S. and operates in many fast-growing areas around the country. The firm has posted three-straight quarters of solid top-line growth in 2020 and it stands to benefit from the stellar housing market that could be poised to keep growing.
More Than Coronavirus Moving…
PulteGroup operates in over 40 major markets, under multiple brands. The company builds homes in popular areas from California and Texas to Chicago and Miami. PHM also reaches a diversified set of customers, which helps it grow everywhere from the Southwest to the West and East Coasts and gain exposure to different buying trends.
The Atlanta-based company claims that 29% of its homes are sold to "first-time" buyers, while 45% come from “move up” clients and 26% from “active adults.” PHM also has exposure to various levels of the housing market, from the under $250K group to $500K and above. In 2019, 30% of its homes closed between $300K to $399K, with another 45% coming at $400K or higher.
PulteGroup has posted some big years of revenue growth recently, with FY16 up 28%, FY17 up 12%, and FY18 up 19%. The firm did see a slowdown last year, with revenue up just slightly to $10.2 billion. That said, the company’s first three quarters of 2020 have been strong. Most recently, its Q3 revenue jumped by 9%, while its adjusted earnings surged 33%.
Plus, PulteGroup’s unit backlog increased by 29%, with its backlog revenue up 32%. “The dramatic rebound in housing demand that began in May continued through the third quarter, as we generated exceptionally strong sales across all buyer groups and realized a 36% increase in net new orders over last year,” CEO Ryan Marshall said in prepared October remarks.
“While COVID-19 still weighs on much of the U.S. economy, housing demand continued to benefit from low interest rates, supportive demographics, limited housing supply and a desire for new homes with features that can meet the evolving needs of today’s homebuyers.”
What Else?
As PulteGroup’s chief executive touched on, the U.S. housing market is booming. For instance, U.S. home sales jumped to a 14-year high in October, which marked the fifth straight monthly increase. The recent growth has been spurred by the coronavirus and the social distancing push that has millions of Americans searching for more space.
Plus, millennials continue to reach their prime homebuying years and a shortage of homes could help PulteGroup and other homebuilders continue to grow. All of these industry tailwinds help elevate the space. PHM’s Building Products-Home Builders industry, which includes Lennar, TRI Pointe and many other highly-ranked stocks, rests in the top 3% of our over 250 Zacks industries.
On top of that, seven of the 12 brokerage recommendations we have for PHM come in at a “Strong Buy” right now, with one more at a “Buy” and none below a “Hold.” The nearby chart shows that PHM shares have crushed their industry over the last five years, up 120% vs. 50%. The stock is up 6% during the last year and 16% in the last six months.
Yet, PulteGroup is actually down around 1% in the last three months to lag its industry’s 12% climb. The stock has swung back and forth above and below its 50-day moving average and at around $43 a share it sits 12% off its early October records.
PHM also trades at a 40% discount to its own 12-month highs in terms of forward earnings and 25% below its median. The stock has also consistently traded at a discount to its industry over the last five years, despite its outperformance.
Investors should also be pleased to know that PulteGroup on December 3 announced that it raised its quarterly dividend by 17%, with its next payout available on January 5 to shareholders of record as of Dec. 16. This new payment pushes its yield up from around 1.1% to 1.3%, both of which easily top its industry’s 0.5% average.
Outlook
Zacks estimates call for PHM’s fiscal 2020 revenue to climb over 6% to reach $10.9 billion, with FY21 then projected to surge 18% higher to reach $12.8 billion. At the bottom-end, its adjusted earnings are expected to climb by 42% and 18%, respectively over this same stretch.
PulteGroup’s positive bottom-line revisions help it land a Zacks Rank #1 (Strong Buy) right now. The company has also consistently topped our EPS estimates and it grabs “B” grades for Value, Growth, and Momentum in our Style Scores system.
Clearly, PulteGroup’s fundamentals appear strong and its stock price might be poised to breakout of its current holding pattern.
Post Holdings is fighting to adapt to changing eating habits and broader consumer trends. The consumer packaged goods giant’s revenue has fallen in six out of the last eight quarters and its earnings outlook took a turn for the worse after it reported disappointing fourth quarter FY20 results on November 19.
Soggy Performance?
Post Holdings is a consumer packaged goods firm that operates five core businesses: Post Consumer, Weetabix, Foodservice, Refrigerated Retail, and BellRing. Overall, its offerings range from Honey Bunches of Oats cereal to potatoes, sausages, and more under the Bob Evans brand to PowerBar and beyond.
The firm’s largest segment is its Post Consumer Brands, which features its North American ready-to-eat cereal offerings. The unit accounted for roughly 34% of total 2020 revenue and it climbed roughly 4% on the year. This helped Post’s overall 2020 revenue pop 0.3%. Unfortunately, the firm’s marginal climb followed a 9% decline in FY19.
On top of that, Post fell short of both our Q4 revenue and earnings estimates. Post’s sales dipped over 2% and its adjusted EPS came in 60% below the year-ago figure and missed by over 20%. As we mentioned at the top, the company has now seen its sales decline in six out of the last eight quarters.
Other Fundamentals…
Post’s stock price reflects its recent lackluster performance. The stock is down around 9% since mid-November, with its shares having moved largely sideways over the last six months. At $94 a share, POST sits around 16% off its April 2019 highs. That said, the stock has still climbed by around 40% in the last five years to crush the broader food market’s slight decline.
Unfortunately, this falls well behind the S&P 500’s 80% expansion during this run. Post also doesn’t pay a dividend and its Food–Miscellaneous space sits in the bottom quarter of over 250 Zacks industries.
Zacks estimates call for the company’s adjusted first quarter FY21 earnings to slip 16% on 3% lower revenue. On top of that, Post’s earnings outlook has trended heavily in the wrong direction since its fourth quarter report on November 19, with its EPS consensus down 21% for this year and 16% for FY22.
Bottom Line
Post’s downward earnings revisions help it land a Zacks Rank #5 (Strong Sell) at the moment, alongside its “D” grade for momentum in our Style Scores system.
All that said, the company’s sales and earnings are projected to climb this year and next. Yet, it still might be best to stay away from Post until it shows some signs of a comeback, with it down 14% in the past 12 months and 9% since mid-November.
Additional content:
Stocks to Watch as Contactless Payment Gains Prominence
The past few months have changed the way businesses and transactions are done. An increasing number of Americans are relying on technology which has seen things like e-commerce and contactless transaction gain prominence.
The coronavirus has definitely played a major role in changing the perception of people. The contactless payment mode which wasn’t too popular has fast become the preferred choice among all age groups. And the trend is likely to stay given that people are finding this mode of payment more convenient.
Contactless Payments Gaining Popularity
Contactless payment options have been there for more than two decades now. However, today its importance is being felt like never before thanks to the pandemic that has compelled people to chose this mode of payment over others on safety concerns. Consumers not only want the ability to shop at their convenience but also want to minimize personal contact with point-of-sale devices. Contactless cards are rising in popularity as a result.
According to a Pew Research Center study published in CNBC, nearly one third of the adults say that they make almost no cash purchases during a week but go for contactless payments. Millennials are the ones who are more comfortable using contactless payments.
The report further says that nearly 34% of adults below the age of 50 don’t make any purchase in a week using cash. Over the years, cash purchases have witnessed a decline and the pandemic has further given a boost to touch-free payment.
Contactless Payment Here to Stay
The sudden surge in contactless payment this year, especially since the coronavirus outbreak, has been working miracles for companies offering these services. The coronavirus fears have compelled people to use contactless payment and changed their behavioral pattern, as many now want to continue with this mode.
However, the country is still a laggard in terms of contactless preference, with only 24% indicating it as their preferred method of payment, according to a report by global data and insights firm Dynata. That may, however, change fast as businesses have started preferring contactless transactions keeping in mind the safety reasons.
Stocks to Watch
PayPal has emerged as one of the largest online payment solutions providers on the back of its strong product portfolio and two-sided platform that enables it to offer smooth and secure transaction facility to both customers and merchants.
The company’s expected earnings growth rate for the current year is 22.6%. The Zacks Consensus Estimate for current-year earnings has improved 2.2% over the past 60 days. The company has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Global Payments was incorporated in Georgia as Global Payments Inc. in 2000 and spun-off from its former parent company in 2001. Including its time as part of its former parent company, it has been in the payment technology services business since 1967.
The company’s expected earnings growth rate for next year is 3.1%. The Zacks Consensus Estimate for current-year earnings has improved 1.4% over the past 60 days. The company has a Zacks Rank #3.
Apple’s Apple Pay is a mobile contact payment system and digital wallet service introduced in 2014. The service allows users to pay for products and services using near field communication at the point of sale, whether in person, via iOS apps or the Internet.
The company’s expected earnings growth rate for the current year is 22.3%. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the past 60 days. Apple carries a Zacks Rank #3.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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PulteGroup, Post Holdings, PayPal, Global Payments and Apple highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – December 7, 2020 – Zacks Equity Research Shares of PulteGroup, Inc. (PHM - Free Report) as the Bull of the Day, Post Holdings, Inc. (POST - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on PayPal Holdings, Inc. (PYPL - Free Report) , Global Payments Inc. (GPN - Free Report) and Apple, Inc. (AAPL - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
PulteGroup is one of the largest homebuilders in the U.S. and operates in many fast-growing areas around the country. The firm has posted three-straight quarters of solid top-line growth in 2020 and it stands to benefit from the stellar housing market that could be poised to keep growing.
More Than Coronavirus Moving…
PulteGroup operates in over 40 major markets, under multiple brands. The company builds homes in popular areas from California and Texas to Chicago and Miami. PHM also reaches a diversified set of customers, which helps it grow everywhere from the Southwest to the West and East Coasts and gain exposure to different buying trends.
The Atlanta-based company claims that 29% of its homes are sold to "first-time" buyers, while 45% come from “move up” clients and 26% from “active adults.” PHM also has exposure to various levels of the housing market, from the under $250K group to $500K and above. In 2019, 30% of its homes closed between $300K to $399K, with another 45% coming at $400K or higher.
PulteGroup has posted some big years of revenue growth recently, with FY16 up 28%, FY17 up 12%, and FY18 up 19%. The firm did see a slowdown last year, with revenue up just slightly to $10.2 billion. That said, the company’s first three quarters of 2020 have been strong. Most recently, its Q3 revenue jumped by 9%, while its adjusted earnings surged 33%.
Plus, PulteGroup’s unit backlog increased by 29%, with its backlog revenue up 32%. “The dramatic rebound in housing demand that began in May continued through the third quarter, as we generated exceptionally strong sales across all buyer groups and realized a 36% increase in net new orders over last year,” CEO Ryan Marshall said in prepared October remarks.
“While COVID-19 still weighs on much of the U.S. economy, housing demand continued to benefit from low interest rates, supportive demographics, limited housing supply and a desire for new homes with features that can meet the evolving needs of today’s homebuyers.”
What Else?
As PulteGroup’s chief executive touched on, the U.S. housing market is booming. For instance, U.S. home sales jumped to a 14-year high in October, which marked the fifth straight monthly increase. The recent growth has been spurred by the coronavirus and the social distancing push that has millions of Americans searching for more space.
Plus, millennials continue to reach their prime homebuying years and a shortage of homes could help PulteGroup and other homebuilders continue to grow. All of these industry tailwinds help elevate the space. PHM’s Building Products-Home Builders industry, which includes Lennar, TRI Pointe and many other highly-ranked stocks, rests in the top 3% of our over 250 Zacks industries.
On top of that, seven of the 12 brokerage recommendations we have for PHM come in at a “Strong Buy” right now, with one more at a “Buy” and none below a “Hold.” The nearby chart shows that PHM shares have crushed their industry over the last five years, up 120% vs. 50%. The stock is up 6% during the last year and 16% in the last six months.
Yet, PulteGroup is actually down around 1% in the last three months to lag its industry’s 12% climb. The stock has swung back and forth above and below its 50-day moving average and at around $43 a share it sits 12% off its early October records.
PHM also trades at a 40% discount to its own 12-month highs in terms of forward earnings and 25% below its median. The stock has also consistently traded at a discount to its industry over the last five years, despite its outperformance.
Investors should also be pleased to know that PulteGroup on December 3 announced that it raised its quarterly dividend by 17%, with its next payout available on January 5 to shareholders of record as of Dec. 16. This new payment pushes its yield up from around 1.1% to 1.3%, both of which easily top its industry’s 0.5% average.
Outlook
Zacks estimates call for PHM’s fiscal 2020 revenue to climb over 6% to reach $10.9 billion, with FY21 then projected to surge 18% higher to reach $12.8 billion. At the bottom-end, its adjusted earnings are expected to climb by 42% and 18%, respectively over this same stretch.
PulteGroup’s positive bottom-line revisions help it land a Zacks Rank #1 (Strong Buy) right now. The company has also consistently topped our EPS estimates and it grabs “B” grades for Value, Growth, and Momentum in our Style Scores system.
Clearly, PulteGroup’s fundamentals appear strong and its stock price might be poised to breakout of its current holding pattern.
Bear of the Day:
Post Holdings is fighting to adapt to changing eating habits and broader consumer trends. The consumer packaged goods giant’s revenue has fallen in six out of the last eight quarters and its earnings outlook took a turn for the worse after it reported disappointing fourth quarter FY20 results on November 19.
Soggy Performance?
Post Holdings is a consumer packaged goods firm that operates five core businesses: Post Consumer, Weetabix, Foodservice, Refrigerated Retail, and BellRing. Overall, its offerings range from Honey Bunches of Oats cereal to potatoes, sausages, and more under the Bob Evans brand to PowerBar and beyond.
The firm’s largest segment is its Post Consumer Brands, which features its North American ready-to-eat cereal offerings. The unit accounted for roughly 34% of total 2020 revenue and it climbed roughly 4% on the year. This helped Post’s overall 2020 revenue pop 0.3%. Unfortunately, the firm’s marginal climb followed a 9% decline in FY19.
On top of that, Post fell short of both our Q4 revenue and earnings estimates. Post’s sales dipped over 2% and its adjusted EPS came in 60% below the year-ago figure and missed by over 20%. As we mentioned at the top, the company has now seen its sales decline in six out of the last eight quarters.
Other Fundamentals…
Post’s stock price reflects its recent lackluster performance. The stock is down around 9% since mid-November, with its shares having moved largely sideways over the last six months. At $94 a share, POST sits around 16% off its April 2019 highs. That said, the stock has still climbed by around 40% in the last five years to crush the broader food market’s slight decline.
Unfortunately, this falls well behind the S&P 500’s 80% expansion during this run. Post also doesn’t pay a dividend and its Food–Miscellaneous space sits in the bottom quarter of over 250 Zacks industries.
Zacks estimates call for the company’s adjusted first quarter FY21 earnings to slip 16% on 3% lower revenue. On top of that, Post’s earnings outlook has trended heavily in the wrong direction since its fourth quarter report on November 19, with its EPS consensus down 21% for this year and 16% for FY22.
Bottom Line
Post’s downward earnings revisions help it land a Zacks Rank #5 (Strong Sell) at the moment, alongside its “D” grade for momentum in our Style Scores system.
All that said, the company’s sales and earnings are projected to climb this year and next. Yet, it still might be best to stay away from Post until it shows some signs of a comeback, with it down 14% in the past 12 months and 9% since mid-November.
Additional content:
Stocks to Watch as Contactless Payment Gains Prominence
The past few months have changed the way businesses and transactions are done. An increasing number of Americans are relying on technology which has seen things like e-commerce and contactless transaction gain prominence.
The coronavirus has definitely played a major role in changing the perception of people. The contactless payment mode which wasn’t too popular has fast become the preferred choice among all age groups. And the trend is likely to stay given that people are finding this mode of payment more convenient.
Contactless Payments Gaining Popularity
Contactless payment options have been there for more than two decades now. However, today its importance is being felt like never before thanks to the pandemic that has compelled people to chose this mode of payment over others on safety concerns. Consumers not only want the ability to shop at their convenience but also want to minimize personal contact with point-of-sale devices. Contactless cards are rising in popularity as a result.
According to a Pew Research Center study published in CNBC, nearly one third of the adults say that they make almost no cash purchases during a week but go for contactless payments. Millennials are the ones who are more comfortable using contactless payments.
The report further says that nearly 34% of adults below the age of 50 don’t make any purchase in a week using cash. Over the years, cash purchases have witnessed a decline and the pandemic has further given a boost to touch-free payment.
Contactless Payment Here to Stay
The sudden surge in contactless payment this year, especially since the coronavirus outbreak, has been working miracles for companies offering these services. The coronavirus fears have compelled people to use contactless payment and changed their behavioral pattern, as many now want to continue with this mode.
However, the country is still a laggard in terms of contactless preference, with only 24% indicating it as their preferred method of payment, according to a report by global data and insights firm Dynata. That may, however, change fast as businesses have started preferring contactless transactions keeping in mind the safety reasons.
Stocks to Watch
PayPal has emerged as one of the largest online payment solutions providers on the back of its strong product portfolio and two-sided platform that enables it to offer smooth and secure transaction facility to both customers and merchants.
The company’s expected earnings growth rate for the current year is 22.6%. The Zacks Consensus Estimate for current-year earnings has improved 2.2% over the past 60 days. The company has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Global Payments was incorporated in Georgia as Global Payments Inc. in 2000 and spun-off from its former parent company in 2001. Including its time as part of its former parent company, it has been in the payment technology services business since 1967.
The company’s expected earnings growth rate for next year is 3.1%. The Zacks Consensus Estimate for current-year earnings has improved 1.4% over the past 60 days. The company has a Zacks Rank #3.
Apple’s Apple Pay is a mobile contact payment system and digital wallet service introduced in 2014. The service allows users to pay for products and services using near field communication at the point of sale, whether in person, via iOS apps or the Internet.
The company’s expected earnings growth rate for the current year is 22.3%. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the past 60 days. Apple carries a Zacks Rank #3.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.