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How are Things Shaping Up for PulteGroup's (PHM) Q3 Earnings?
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PulteGroup Inc. (PHM - Free Report) is scheduled to report third-quarter 2018 results on Oct 23, before the opening bell.
In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 20.3%. It surpassed estimates in all the trailing four quarters, with an average of 14.3%.
Let us take a look at the factors that are likely to influence the company’s third-quarter 2018 results.
Core Objectives to Drive Revenues
The company remains focused on achieving high returns on invested capital as it continues to emphasize investing in smaller and faster turning projects. PulteGroup also continues to realize efficiencies throughout its homebuilding operations. The company rolled out innovative new floor plans and market testing of its new active adult floor plans, ahead of its national rollout early next year.
All these efforts bode well for PulteGroup, as is evident from its six-month revenue figure. Revenues of the company increased 24.3% in the first six months of 2018. Deliveries were up 12% during the period. The company expects deliveries to increase between 6,000 and 6,300 homes, reflecting an increase of 17-22% year over year for the third quarter. Given the strong demand, the trend is likely to be reflected in the to-be-reported quarter’s results as well.
Although rising interest and mortgage rates, as well as higher raw material costs have been hurting the industry of late, underlying demand trend remains positive courtesy of steady job and wage growth, recovering economy, rapidly increasing household formation, along with a limited supply of inventory.
The Zacks Consensus Estimate of $2.54 billion for Homebuilding revenues reflects growth from $2.08 billion a year ago and $2.52 billion in the preceding quarter. Meanwhile, the consensus estimate for Financial Services revenues of $58 million reflects a year-over-year increase of 23.5%.
Overall, for the third quarter, the Zacks Consensus Estimate for total revenues is pegged at $2.6 billion, implying 22.3% growth.
Cost-Saving Initiatives to Boost Earnings
Apart from prudent capital allocation, PulteGroup is taking actions to improve the operating and financial performance. These initiatives include improving overhead leverage, increasing inventory turns and implementing new pricing strategies, which are expected to boost profits in the quarter to be reported.
PulteGroup’s adjusted gross margin increased 60 basis points (bps) in the last reported quarter. Adjusted operating margin increased 180 bps and most importantly, adjusted earnings per share grew 89%.
The company expects gross margin in the range of 24-24.5% (versus 23.9% in the year-ago quarter).
Overall, considering higher revenue expectation as well as prudent cost-saving initiatives, the company’s bottom line is expected to increase significantly. The Zacks Consensus Estimate for earnings is pegged at 95 cents, reflecting a 58.3% increase from the prior-year quarter.
PulteGroup has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — that increases the odds of an earnings beat.
Earnings ESP: PulteGroup has an Earnings ESP of +6.88%.
Zacks Rank: PulteGroup currently carries a Zacks Rank #3, which increases the predictive power of ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
Other Stocks Worth a Look
Here are some other companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.
Rayonier Inc. (RYN - Free Report) has an Earnings ESP of +16.67% and carries a Zacks Rank #3. The company is slated to report quarterly numbers on Oct 31, 2018.
Jacobs Engineering Group Inc. has an Earnings ESP of +5.25% and holds a Zacks Rank #3. The company is expected to report quarterly numbers on Nov 20, 2018.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Image: Bigstock
How are Things Shaping Up for PulteGroup's (PHM) Q3 Earnings?
PulteGroup Inc. (PHM - Free Report) is scheduled to report third-quarter 2018 results on Oct 23, before the opening bell.
In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 20.3%. It surpassed estimates in all the trailing four quarters, with an average of 14.3%.
Let us take a look at the factors that are likely to influence the company’s third-quarter 2018 results.
Core Objectives to Drive Revenues
The company remains focused on achieving high returns on invested capital as it continues to emphasize investing in smaller and faster turning projects. PulteGroup also continues to realize efficiencies throughout its homebuilding operations. The company rolled out innovative new floor plans and market testing of its new active adult floor plans, ahead of its national rollout early next year.
All these efforts bode well for PulteGroup, as is evident from its six-month revenue figure. Revenues of the company increased 24.3% in the first six months of 2018. Deliveries were up 12% during the period. The company expects deliveries to increase between 6,000 and 6,300 homes, reflecting an increase of 17-22% year over year for the third quarter. Given the strong demand, the trend is likely to be reflected in the to-be-reported quarter’s results as well.
Although rising interest and mortgage rates, as well as higher raw material costs have been hurting the industry of late, underlying demand trend remains positive courtesy of steady job and wage growth, recovering economy, rapidly increasing household formation, along with a limited supply of inventory.
The Zacks Consensus Estimate of $2.54 billion for Homebuilding revenues reflects growth from $2.08 billion a year ago and $2.52 billion in the preceding quarter. Meanwhile, the consensus estimate for Financial Services revenues of $58 million reflects a year-over-year increase of 23.5%.
Overall, for the third quarter, the Zacks Consensus Estimate for total revenues is pegged at $2.6 billion, implying 22.3% growth.
Cost-Saving Initiatives to Boost Earnings
Apart from prudent capital allocation, PulteGroup is taking actions to improve the operating and financial performance. These initiatives include improving overhead leverage, increasing inventory turns and implementing new pricing strategies, which are expected to boost profits in the quarter to be reported.
PulteGroup’s adjusted gross margin increased 60 basis points (bps) in the last reported quarter. Adjusted operating margin increased 180 bps and most importantly, adjusted earnings per share grew 89%.
The company expects gross margin in the range of 24-24.5% (versus 23.9% in the year-ago quarter).
Overall, considering higher revenue expectation as well as prudent cost-saving initiatives, the company’s bottom line is expected to increase significantly. The Zacks Consensus Estimate for earnings is pegged at 95 cents, reflecting a 58.3% increase from the prior-year quarter.
PulteGroup, Inc. Price and EPS Surprise
PulteGroup, Inc. Price and EPS Surprise | PulteGroup, Inc. Quote
What Does the Zacks Model Unveil?
PulteGroup has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — that increases the odds of an earnings beat.
Earnings ESP: PulteGroup has an Earnings ESP of +6.88%.
Zacks Rank: PulteGroup currently carries a Zacks Rank #3, which increases the predictive power of ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
Other Stocks Worth a Look
Here are some other companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.
Rayonier Inc. (RYN - Free Report) has an Earnings ESP of +16.67% and carries a Zacks Rank #3. The company is slated to report quarterly numbers on Oct 31, 2018.
KBR, Inc. (KBR - Free Report) has an Earnings ESP of +0.65% and a Zacks Rank #3. The company is expected to report quarterly results on Oct 30, 2018. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Jacobs Engineering Group Inc. has an Earnings ESP of +5.25% and holds a Zacks Rank #3. The company is expected to report quarterly numbers on Nov 20, 2018.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>