It has been about a month since the last earnings report for PulteGroup (
PHM Quick Quote PHM - Free Report) . Shares have added about 1.8% 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 the most recent earnings report in order to get a better handle on the important drivers.
PulteGroup’s Q1 Earnings & Revenue Beat
PulteGroup started 2023 on an impressive note. The company reported first-quarter 2023 results, wherein earnings and revenues surpassed the respective Zacks Consensus Estimate and increased year over year.
The company witnessed solid gross orders, closings and margins in the first quarter and posted a 28% increase in earnings per share (EPS) and a 12-month return on equity of 32%. Inside the Headlines
Adjusted EPS came in at $2.35, which topped the consensus mark of $1.78 by 32% and increased 28.4% from $1.83 per share a year ago. The upside was driven by gains in revenues, improved gross margins and overhead leverage.
Total revenues of $5.58 billion also beat the consensus mark of $3.27 billion by 9.4% and increased 13.5% from the year-ago figure of $3.15 billion. Segment Discussion
PulteGroup primarily operates through two business segments — Homebuilding and Financial Services.
Revenues from the Homebuilding segment were up 14.8% year over year to $5.52 billion. Home sale revenues of $3.49 billion increased 15.1% year over year, mainly due to the higher average price of homes closed and higher deliveries. Land sale revenues also declined 9.3% from a year ago to $30.1 million. The number of homes closed increased 6% from the year-ago level to 6,394 units. The average selling price of homes delivered was $545,000, up 9% year over year. Most importantly, its backlog, which represents orders yet to be closed, was 13,129 units, down from 19,935 units a year ago. In addition, potential housing revenues from backlog decreased 30.8% from the prior-year quarter to $8 billion. Gross home orders grew 1% year over year to 8,898 units. Net new home orders dropped 8% year over year to 7,354 units for the quarter. This resulted in a cancelation rate of 13%, up from 4% in the prior-year period. Home orders were down across all operating regions served, barring Southeast and Florida. The value of net new orders also declined 20% from a year ago to $3.8 billion. Home sales gross margin was down 20 basis points (bps) year over year to 29.1% for the reported quarter. SG&A expenses (as a percentage of home sales revenues) improved 130 bps to 9.6%. Operating margin increased by 100 bps year over year to 19.5%. Revenues from the Financial Services segment declined 31.1% year over year to $57.9 million. Pretax income for the segment decreased to $14 million from $41 million a year ago. The decline was due to a reduction in loan volumes owing to a fall in capture rate to 78% compared with 81% last year and the more competitive pricing environment. Financials
At the end of Mar 31, 2023, cash, cash equivalents and restricted cash were $1.33 billion, up from $1.09 billion in 2022-end. Net debt-to-capital was 7.2% at the first-quarter end, down from 9.6% at 2022-end.
Net cash provided by operating activities was $711.4 million in the first quarter, up from $207.7 million a year ago. In first-quarter 2023, the company repurchased 2.8 million common shares for $150 million at an average price of $54.30 per share. Meanwhile, PHM also approved a $1.0 billion increase to its share repurchase authorization. How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 33.98% due to these changes.
Currently, PulteGroup has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise PulteGroup has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.