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PulteGroup (PHM) to Report Q4 Earnings: What's in the Cards?

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PulteGroup Inc. (PHM - Free Report) is scheduled to report fourth-quarter 2022 results on Jan 31, before the opening bell.

In the last-reported quarter, the company’s earnings and revenues missed the Zacks Consensus Estimate by 1.5% and 2.5%, respectively. Earnings and revenues increased 47.8% and 13.4% on a year-over-year basis, respectively.

It is to be noted that PHM surpassed earnings estimates in 21 of the trailing 24 quarters.

PulteGroup, Inc. Price, Consensus and EPS Surprise

PulteGroup, Inc. Price, Consensus and EPS Surprise

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

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has increased to $2.88 from $2.87 per share over the past seven days. The estimated figure indicates a 14.7% increase from the year-ago earnings of $2.51 per share. Also, the consensus mark for revenues is $4.60 billion, suggesting 5.6% year-over-year growth.

Factors to Note

The U.S. housing market has been navigating through a challenging time comprising higher rates environment, continued supply-chain issues, material cost inflation and higher wages. Additionally, the uncertain economic scenario has been prompting moderation in housing demand.

Nonetheless, PulteGroup has been reaping benefits from the successful execution of initiatives to boost profitability, with a focus on entry-level homes. The company’s earnings and revenues are expected to have increased in the fourth quarter, given a prudent land investment strategy, higher pricing and affordable product offerings.

However, unprecedented supply-chain challenges and labor shortages are likely to have created hurdles for builders to fulfill orders and deliveries, thereby impacting revenues and orders.

PulteGroup expects home deliveries to be 8,000, indicating a decline from 8,611 homes delivered a year ago. The decrease reflects the challenging sales environment, higher cancelation rates and the ongoing impact of Hurricane Ian on Florida operations. It expects a higher average selling price or ASP for the quarter in the range of $560,000-$570,000, suggesting an increase from $490,000 in the year-ago period.

Overall, the Zacks Consensus Estimate for Homebuilding revenues of $4.52 billion suggests an increase of 6.1% from $4.26 billion a year ago, courtesy of higher ASP.

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 pricing and prudent cost-saving efforts are likely to have mitigated the risks.

Given these cost price dynamics, the company expects homebuilding gross margins to expand 120 bps to 28% for fourth-quarter 2022 from the year-ago period.

SG&A expenses (as a percentage of home sales revenues) for the quarter are expected to be in the 9.2-9.5% range. The figure was 8.7% a year ago on an adjusted basis and 8.2%, including the $23 million net pre-tax benefit from adjustments to insurance-related reserves recorded in the period.

What the Zacks Model Unveils

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: PHM has an Earnings ESP of -2.26%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently carries a Zacks Rank #4 (Sell).

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 on their respective quarters to be reported.

Boise Cascade Company (BCC - Free Report) has an Earnings ESP of +0.90% and carries a Zacks Rank #3.

BCC’s earnings topped the consensus mark in all the last four quarters, with the average surprise being 30.9%.

United Rentals, Inc. (URI - Free Report) has an Earnings ESP of +1.31% and holds a Zacks Rank #2.

The earnings of URI topped the consensus mark in all the last four quarters, with the average surprise being 9.5%. Earnings for the to-be-reported quarter are expected to grow 36.5% year over year.

Fluor Corporation (FLR - Free Report) has an Earnings ESP of +2.48% and carries a Zacks Rank #2.

FLR’s earnings topped the consensus mark in one of the last four quarters but missed on three occasions, with the average negative surprise being 38.2%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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