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Shares of PulteGroup Inc. (PHM - Analyst Report) reached a 52-week high of $24.26 on Tuesday, May 14 gaining momentum from solid first-quarter 2013 results announced on Apr 25. Moreover, this homebuilder has a bright outlook for the rest of the year with the improving housing fundamentals. The closing price of the shares on May 14 was $24.25, yielding a superb year-to-date return of 30.4%.

Share Price Drivers

Estimates have been rising for Pulteafter it reported strong first-quarter 2013 results beating the Zacks Consensus Estimate for both revenues and earnings.

Pulte’s adjusted net earnings of 21 cents per share beat the Zacks Consensus Estimate by 31.3%. Earnings were also significantly better than the prior-year quarter loss of 3 cents per share. The earnings upsurge was driven by strong homebuilding revenues, gross margin expansion and solid operating leverage.

Homebuilding revenues climbed 32.9% year over year driven by better pricing power and volume growth amid improving housing market conditions. Homes sold, closed and in backlog, all increased in the quarter compared to the year-ago quarter. Gross margins improved year-over-year driven by higher pricing and better mix of sales. Moreover, the continued fall in overhead costs is pulling down the company’s Selling, General and Administrative (SG&A) expenses substantially and subsequently boosting operating margins.

We believe that homebuilders like Pulte, who have significant land positions, broad geographic and product diversity, and better capital positions, are expected to take maximum advantage of the housing recovery. Management believes that 2013 will be a better year for the housing industry than 2012.

The robust quarterly results led to an upward bias in estimate revisions. In fact, the Zacks Consensus Estimate for 2013 and 2014 increased a respective 18.2% and 3.0% to $1.30 and $1.39 per share over the last 30 days. Moreover, Pulte has beaten the Zacks Consensus Estimate for the past four quarters with an average earnings surprise of an impressive 59%.

Other Stocks to Consider

Other stocks in the homebuilding sector that are performing well and deserve a mention include Ryland Group Inc. (RYL - Snapshot Report), Meritage Homes Corporation (MTH - Snapshot Report) and D.R. Horton, Inc. (DHI - Analyst Report), all carrying a Zacks Rank #1 (Strong Buy).

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