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Pricing to Help PulteGroup's (PHM) Homebuilding in Q1 Earnings
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PulteGroup, Inc.’s (PHM - Free Report) Homebuilding segment, accounting for more than 97% of total revenues, is expected to have registered growth, mainly attributable to higher housing prices. Consequently, the segment is likely to contribute to overall revenues when it reports first-quarter 2023 results on Apr 25.
PulteGroup has exhibited a solid performance over the past year, with the stock rising 43.8%, outperforming the Zacks Building Products - Home Builders industry’s 37.8% increase. It has been benefiting from its focus on entry-level buyers and liquidity protection, prudent management of cash flows and land investment strategy. However, accelerating mortgage rates and continuous supply-chain issues pose a concern.
Click here to know how the company’s overall Q1 performance is expected to be.
Image Source: Zacks Investment Research
A Look at Q1 Segmental Performance
PulteGroup’s Homebuilding segment is expected to have registered growth, courtesy of a higher average selling price or ASP.
We expect Homebuilding revenues to increase 3% to $3.19 billion from $3.1 billion a year ago. Within the Homebuilding umbrella, home sales are expected to be $3.16 billion, reflecting 3% year-over-year growth. Land sales are expected to rise 4.8% to $34.8 million in the quarter.
PulteGroup expects home deliveries to be within 5,400-5,700 homes, indicating a decline from 6,039 homes delivered a year ago. The decrease reflects the challenging sales environment and higher cancelation rates. It expects ASP within $565,000-$575,000, indicating an increase of 12% from a year ago.
A prudent land investment strategy and focus on entry-level buyers are expected to have benefited PulteGroup in the first quarter. However, macroeconomic uncertainties and higher rates might have impacted the demand for homes in the quarter. This is expected to have reflected in the quarterly sales as well as orders for homes.
Also, the labor market tightened with the limited availability of labor, arresting the rapid growth in housing production. Although higher pricing is expected to have mitigated the risks, these headwinds might have impacted the upcoming results to some extent.
The company expects the homebuilding gross margin to contract 200 basis points to 27% for first-quarter 2023 from the year-ago period's reported figure. We expect the homebuilding gross margin to contract 26.5% in the first quarter from 28.7% a year ago.
PulteGroup anticipates SG&A (as a percentage of home sales revenues) in the range of 10.5-11%, whereas it reported 10.7% in the prior year.
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $1.78 per share, indicating a 2.7% decline from the year-ago figure of $1.83. Also, the consensus mark for revenues is $3.27 billion, suggesting 2.5% year-over-year growth.
D.R. Horton, Inc. (DHI - Free Report) reported second-quarter fiscal 2023 (ended Mar 31, 2023) results, wherein earnings and revenues surpassed their respective Zacks Consensus Estimate. Shares of the company gained more than 5% in the pre-market trading session on Apr 20.
Although, earnings and revenues declined on a year-over-year basis due to prevailing softness in the market, DHI highlighted that net sales orders increased 73% from the fiscal first quarter, defying the prevailing higher mortgage rates and inflationary pressures.
KB Home (KBH - Free Report) reported better-than-expected first-quarter fiscal 2023 (ended Feb 28, 2023) results, defying the challenging housing market conditions. Its earnings and revenues beat the Zacks Consensus Estimate.
KBH’s quarterly revenues were at the high end of its guided range, and both operating and gross margins performed better than expected. KBH’s book value per share grew to $44.80, up 27% from a year ago.
RPM International Inc. (RPM - Free Report) reported third-quarter fiscal 2023 (ended Feb 28, 2023) results, wherein its earnings and sales beat the Zacks Consensus Estimate. Meanwhile, although sales increased, earnings declined year over year.
In the quarter, RPM’s net sales benefited from reshoring and infrastructure spending.
Image: Bigstock
Pricing to Help PulteGroup's (PHM) Homebuilding in Q1 Earnings
PulteGroup, Inc.’s (PHM - Free Report) Homebuilding segment, accounting for more than 97% of total revenues, is expected to have registered growth, mainly attributable to higher housing prices. Consequently, the segment is likely to contribute to overall revenues when it reports first-quarter 2023 results on Apr 25.
PulteGroup has exhibited a solid performance over the past year, with the stock rising 43.8%, outperforming the Zacks Building Products - Home Builders industry’s 37.8% increase. It has been benefiting from its focus on entry-level buyers and liquidity protection, prudent management of cash flows and land investment strategy. However, accelerating mortgage rates and continuous supply-chain issues pose a concern.
Click here to know how the company’s overall Q1 performance is expected to be.
Image Source: Zacks Investment Research
A Look at Q1 Segmental Performance
PulteGroup’s Homebuilding segment is expected to have registered growth, courtesy of a higher average selling price or ASP.
We expect Homebuilding revenues to increase 3% to $3.19 billion from $3.1 billion a year ago. Within the Homebuilding umbrella, home sales are expected to be $3.16 billion, reflecting 3% year-over-year growth. Land sales are expected to rise 4.8% to $34.8 million in the quarter.
PulteGroup expects home deliveries to be within 5,400-5,700 homes, indicating a decline from 6,039 homes delivered a year ago. The decrease reflects the challenging sales environment and higher cancelation rates. It expects ASP within $565,000-$575,000, indicating an increase of 12% from a year ago.
A prudent land investment strategy and focus on entry-level buyers are expected to have benefited PulteGroup in the first quarter. However, macroeconomic uncertainties and higher rates might have impacted the demand for homes in the quarter. This is expected to have reflected in the quarterly sales as well as orders for homes.
Also, the labor market tightened with the limited availability of labor, arresting the rapid growth in housing production. Although higher pricing is expected to have mitigated the risks, these headwinds might have impacted the upcoming results to some extent.
The company expects the homebuilding gross margin to contract 200 basis points to 27% for first-quarter 2023 from the year-ago period's reported figure. We expect the homebuilding gross margin to contract 26.5% in the first quarter from 28.7% a year ago.
PulteGroup anticipates SG&A (as a percentage of home sales revenues) in the range of 10.5-11%, whereas it reported 10.7% in the prior year.
PulteGroup, Inc. Price and EPS Surprise
PulteGroup, Inc. price-eps-surprise | PulteGroup, Inc. Quote
Overall Q1 Earnings & Revenue Expectations
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $1.78 per share, indicating a 2.7% decline from the year-ago figure of $1.83. Also, the consensus mark for revenues is $3.27 billion, suggesting 2.5% year-over-year growth.
PulteGroup, a Zacks Rank #3 (Hold) company, surpassed earnings estimates in 22 of the trailing 25 quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A Few Recent Construction Releases
D.R. Horton, Inc. (DHI - Free Report) reported second-quarter fiscal 2023 (ended Mar 31, 2023) results, wherein earnings and revenues surpassed their respective Zacks Consensus Estimate. Shares of the company gained more than 5% in the pre-market trading session on Apr 20.
Although, earnings and revenues declined on a year-over-year basis due to prevailing softness in the market, DHI highlighted that net sales orders increased 73% from the fiscal first quarter, defying the prevailing higher mortgage rates and inflationary pressures.
KB Home (KBH - Free Report) reported better-than-expected first-quarter fiscal 2023 (ended Feb 28, 2023) results, defying the challenging housing market conditions. Its earnings and revenues beat the Zacks Consensus Estimate.
KBH’s quarterly revenues were at the high end of its guided range, and both operating and gross margins performed better than expected. KBH’s book value per share grew to $44.80, up 27% from a year ago.
RPM International Inc. (RPM - Free Report) reported third-quarter fiscal 2023 (ended Feb 28, 2023) results, wherein its earnings and sales beat the Zacks Consensus Estimate. Meanwhile, although sales increased, earnings declined year over year.
In the quarter, RPM’s net sales benefited from reshoring and infrastructure spending.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.