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PulteGroup (PHM) to Report Q3 Earnings: What's in Store?

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PulteGroup Inc. (PHM - Free Report) is scheduled to report third-quarter 2021 results on Oct 26, before the opening bell.

In the last reported quarter, the company’s earnings met the Zacks Consensus Estimate but revenues missed the same by 4.5%. That said, earnings and revenues increased 49.6% and 29.5% on a year-over-year basis, respectively.

The company surpassed earnings estimates in 18 of the trailing 19 quarters.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has decreased to $1.83 per share from $1.85 over the past seven days. Nonetheless, the estimated figure indicates a 36.6% increase from the year-ago earnings of $1.34 per share. Also, the consensus mark for revenues is $3.51 billion, suggesting 19% year-over-year growth.

PulteGroup, Inc. Price and EPS Surprise

PulteGroup, Inc. Price and EPS Surprise

PulteGroup, Inc. price-eps-surprise | PulteGroup, Inc. Quote

Factors to Consider

PulteGroup’s earnings and revenues are expected to have increased in the third quarter, given a prudent land investment strategy, focus on entry-level buyers along with a positive housing market trend.

The U.S. housing market has been riding high since the onset of the pandemic (albeit at a slower pace on supply chain challenges) buoyed by a low mortgage rate environment. This apart, the rising trend of work from home owing to the coronavirus outbreak has been prompting many families to purchase a house, thereby boosting demand. Also, PulteGroup has been reaping benefits from the successful execution of initiatives to boost profitability, with a focus on entry-level homes.

Yet, unprecedented supply chain challenges and labor shortages have been creating pressure on builders to fulfill orders and deliveries, thereby impacting revenues to some extent.

Overall, the Zacks Consensus Estimate for Homebuilding revenues of $3.46 billion suggests an increase of 21.3% on a year-over-year basis, courtesy of higher average selling price or ASP and deliveries.

From the margin perspective, input cost inflation and high costs associated with labor and transportation are expected to have weighed on margins to some extent. That said, higher leverage owing to solid demand across each of the buyer groups is expected to have mitigated the risks. As such, given these cost price dynamics, the company expects homebuilding gross margins to expand to 26.8% for third-quarter 2021 from 24.5% reported in the year-ago period.

SG&A expenses (as a percentage of home sales revenues) for the quarter are expected in the 9-9.5% range. The figure was 9.6% a year ago.

Overall, higher sales and prices along with improved deliveries and operating leverage are expected to have benefited PulteGroup’s earnings and revenues in the third quarter amid continuous supply chain woes.

What Our Model Indicates

Our proven model does not conclusively predict an earnings beat for PulteGroup for the quarter to be reported. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: Its Earnings ESP is -1.46%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

Here are some 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.

KBR, Inc. (KBR - Free Report) has an Earnings ESP of +2.66% and carries a Zacks Rank #2.

Otis Worldwide Corporation (OTIS - Free Report) has an Earnings ESP of +0.91% and a Zacks Rank #3.

Martin Marietta Materials, Inc. (MLM - Free Report) has an Earnings ESP of +0.37% and a Zacks Rank #3.