It has been about a month since the last earnings report for PulteGroup (
PHM Quick Quote PHM - Free Report) . Shares have added about 3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is PulteGroup due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
PulteGroup ( PHM Quick Quote PHM - Free Report) Q2 Earnings Meet, Revenues Miss
PulteGroup Inc. reported second-quarter 2021 results, wherein earnings met the Zacks Consensus Estimate but revenues missed the same.
Nonetheless, both earnings and revenues grew year over year buoyed by solid housing market momentum, and limited inventory of new and existing homes. PulteGroup remains optimistic about the company’s prospects, given persistent economic recovery, a positive job market, low interest rates and high level of consumer confidence. Ryan Marshall, president and chief executive officer of PulteGroup, highlighted, “With a backlog exceeding 20,000 homes valued at $9.8 billion, I believe the Company is well positioned to realize further gains in the coming quarters as we work to grow our operations and continue to deliver high returns on equity, which totaled 25.7%* for the trailing 12 months.“ Inside the Headlines
Adjusted earnings per share came in at $1.72, in line with the consensus mark. Earnings grew 49.6% from $1.15 per share a year ago.
Total revenues of $3.36 billion missed the consensus mark by 4.5%, marking the second consecutive quarter of revenues miss. That said, revenues increased 29.5% from the year-ago figure of $2.59 billion. Segment Discussion
PulteGroup primarily operates through two business segments — Homebuilding and Financial Services.
Revenues from the Homebuilding segment were up 30.8% year over year to $3.27 billion. Home sale revenues of $3.24 billion also improved 30.9% year over year, mainly due to higher deliveries and average price of homes closed. Land sale revenues improved 22.7% from a year ago to $33.1 million. The number of homes closed increased 22% year over year to 7,232. Home closings grew across all operating regions served. Average selling price of homes delivered was $447,000, up 7% year over year. Importantly, its backlog — which represents orders yet to be closed — was 20,056 units, up 52% year over year. In addition, potential housing revenues from backlog increased 70% from the prior-year quarter to $9.8 billion. New home orders grew 28% year over year to 8,322 units for the quarter. Home orders were up across all operating regions served. Value of new orders also improved 59% from a year ago to $4.3 billion. Margins Home sales gross margin was up 270 basis points (bps) year over year to 26.6% for the quarter. Furthermore, adjusted operating margin expanded 280 bps to 16.7%, as adjusted homebuilding SG&A expenses (as a percentage of home sales revenues) improved 20 bps year over year to 9.8%. Revenues from the Financial Services segment declined 4% year over year to $91 million. Pretax income for the segment was down to $51 million from $60 million a year ago. Higher loan volumes were offset by a competitive pricing environment. Financials
As of Jun 30, 2021, cash and cash equivalents were $1.66 billion, down from $2.58 billion at 2020-end. Debt to total capital of 22.7% at second quarter-end was down from 29.5% at 2020-end. In the quarter, the company repurchased 3.6 million common shares for $200 million, or an average price of $55.84 per share.
PulteGroup expects closings between 7,300 and 7,600 homes, indicating 15% year-over-year growth at midpoint. It expects ASP for the third quarter in the range of $470,000-$475,000. It expects gross margin for the third and fourth quarters to be 26.8% and 27.3%, respectively. SG&A expenses — as a percentage of home sale revenues — are expected in the range of 9-9.5%.
During the second-quarter earnings call, the company updated its guidance for full-year closings to 30,500 homes from 32,000 expected earlier. This indicates a 24% increase in 2021 deliveries from a year ago. It expects community count to be 5-10% lower year over year in each of the remaining quarters of 2021. For 2021, it now expects adjusted SG&A — as a percentage of homebuilding revenues — to be 9.6% versus prior expectation of 9.8%. The company continues to expect tax rate to be 23.5% for the balance of 2021, including benefits from energy tax credits that it expects to realize this year.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -7.78% due to these changes.
At this time, PulteGroup has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, PulteGroup has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.