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PulteGroup (PHM) Home Sales to Grow Sequentially in Q2 Earnings
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PulteGroup, Inc.’s (PHM - Free Report) Homebuilding segment, accounting for more than 98% of total revenues, is expected to have marginally declined year over year. However, it is likely to grow sequentially when PHM reports second-quarter 2023 results on Jul 25.
PulteGroup has exhibited a solid performance so far this year, with the stock rising 71.5%, outperforming the Zacks Building Products - Home Builders industry’s 49.3% 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 pose a concern.
Click here to know how the company’s overall second-quarter performance is expected to be.
Image Source: Zacks Investment Research
A Look at Q2 Segmental Performance
PulteGroup’s Homebuilding segment is expected to have reflected the impact of accelerating mortgage rates on a year-over-year basis. Nonetheless, the shortage of existing homes for sale in the market has been driving demand for new homes. The home sales segment is expected to have registered growth sequentially, courtesy of higher deliveries. Also, a prudent land investment strategy and focus on entry-level buyers are expected to have benefited PulteGroup in the second quarter.
Our model predicts Homebuilding revenues to increase sequentially to $3.79 billion in the second quarter from $3.52 billion in the first quarter of 2023 but a decrease from $3.8 billion a year ago. Within the Homebuilding umbrella, we expect home sales to be $3.78 billion, reflecting a 0.2% year-over-year decline but an increase of 7.7% sequentially. Land sales are expected to decline 3.4% year over year to $32.7 million in the second quarter but increase 8.7% sequentially.
PulteGroup expects home deliveries to be within 7,000-7,400 homes versus 7,177 homes delivered a year ago. Our model predicts deliveries to decline 2.1% year over year but increase 9.9% sequentially to 7,026 units. The decrease reflects a tough year-over-year comparison, given rising mortgage rates.
PHM expects an average selling price or ASP for the quarter in the range of $525,000-$535,000 compared with the year-ago level of $531,000. Our model predicts the ASP of homes delivered to inch up 0.7% year over year to $534,600 but decline 1.9% sequentially.
Also, the labor market tightened with the limited availability of labor, arresting the rapid growth in housing production. Labor shortages are leading to higher wages, thereby putting pressure on the margins.
From the margin perspective, the company expects home sale gross margins to contract in the range of 27.5%-28% for second-quarter 2023 from 31.3% reported in the year-ago period. Although construction costs remain elevated otherwise, the gross margin of the quarter is likely to have reflected the benefits of lower lumber costs that are flowing through PHM’s operations. Our model predicts homebuilding gross margins to be 27.8% for the quarter, down from the year-ago period as well as sequentially.
PulteGroup anticipates SG&A expenses (as a percentage of home sales revenues) to be in the range of 9-9.5% versus 9.2% in the prior-year quarter. Our model predicts SG&A expenses to be 9.5% of home sales revenues for the quarter, up from the year-ago level but down sequentially.
Meanwhile, we expect the company’s new orders to increase 9.4% year over year to 7,019 units in the quarter. Backlog is expected to decline 31.6% year over year to 13,122 units.
Overall Q2 Earnings & Revenue Expectations
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $2.47 per share, indicating a 9.5% decline from the year-ago figure of $2.73. Also, the consensus mark for revenues is $3.96 billion, suggesting 0.8% year-over-year growth.
D.R. Horton, Inc. (DHI - Free Report) reported third-quarter fiscal 2023 (ended Jun 30, 2023) results, wherein earnings and revenues surpassed their respective Zacks Consensus Estimate.
On a year-over-year basis, although DHI’s earnings declined, revenues increased. Notably, the company highlighted that the supply of both new and existing homes at affordable price points remains limited, and demographics supporting housing demand remain favorable. This tailwind has helped this Arlington, TX-based homebuilder to witness net sales order growth of 37% year over year in the fiscal third quarter.
KB Home (KBH - Free Report) reported better-than-expected results for second-quarter fiscal 2023 (ended May 31, 2023). Both earnings and revenues beat the Zacks Consensus Estimate. The company’s earnings and revenues surpassed the consensus mark in two consecutive quarters.
KBH’s net orders grew 1% in the quarter to 3,936 units from the prior year. The value of net orders, however, was down 11% from the year-ago quarter to $1.9 billion due to lower ASP. Sequentially, net orders grew 84% in units and 90% in value, respectively.
Acuity Brands, Inc. (AYI - Free Report) reported mixed results for third-quarter fiscal 2023 (ended May 31, 2023), wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Earnings beat the consensus mark for the 13th consecutive quarter. Revenues missed the same for three quarters in a row following six straight quarters of beat.
Along with the earnings, AYI announced the completion of the acquisition of KE2 Therm. This will enable it to expand its Distech Brand by entering the commercial refrigeration control space.
Image: Bigstock
PulteGroup (PHM) Home Sales to Grow Sequentially in Q2 Earnings
PulteGroup, Inc.’s (PHM - Free Report) Homebuilding segment, accounting for more than 98% of total revenues, is expected to have marginally declined year over year. However, it is likely to grow sequentially when PHM reports second-quarter 2023 results on Jul 25.
PulteGroup has exhibited a solid performance so far this year, with the stock rising 71.5%, outperforming the Zacks Building Products - Home Builders industry’s 49.3% 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 pose a concern.
Click here to know how the company’s overall second-quarter performance is expected to be.
Image Source: Zacks Investment Research
A Look at Q2 Segmental Performance
PulteGroup’s Homebuilding segment is expected to have reflected the impact of accelerating mortgage rates on a year-over-year basis. Nonetheless, the shortage of existing homes for sale in the market has been driving demand for new homes. The home sales segment is expected to have registered growth sequentially, courtesy of higher deliveries. Also, a prudent land investment strategy and focus on entry-level buyers are expected to have benefited PulteGroup in the second quarter.
Our model predicts Homebuilding revenues to increase sequentially to $3.79 billion in the second quarter from $3.52 billion in the first quarter of 2023 but a decrease from $3.8 billion a year ago. Within the Homebuilding umbrella, we expect home sales to be $3.78 billion, reflecting a 0.2% year-over-year decline but an increase of 7.7% sequentially. Land sales are expected to decline 3.4% year over year to $32.7 million in the second quarter but increase 8.7% sequentially.
PulteGroup expects home deliveries to be within 7,000-7,400 homes versus 7,177 homes delivered a year ago. Our model predicts deliveries to decline 2.1% year over year but increase 9.9% sequentially to 7,026 units. The decrease reflects a tough year-over-year comparison, given rising mortgage rates.
PHM expects an average selling price or ASP for the quarter in the range of $525,000-$535,000 compared with the year-ago level of $531,000. Our model predicts the ASP of homes delivered to inch up 0.7% year over year to $534,600 but decline 1.9% sequentially.
Also, the labor market tightened with the limited availability of labor, arresting the rapid growth in housing production. Labor shortages are leading to higher wages, thereby putting pressure on the margins.
From the margin perspective, the company expects home sale gross margins to contract in the range of 27.5%-28% for second-quarter 2023 from 31.3% reported in the year-ago period. Although construction costs remain elevated otherwise, the gross margin of the quarter is likely to have reflected the benefits of lower lumber costs that are flowing through PHM’s operations. Our model predicts homebuilding gross margins to be 27.8% for the quarter, down from the year-ago period as well as sequentially.
PulteGroup anticipates SG&A expenses (as a percentage of home sales revenues) to be in the range of 9-9.5% versus 9.2% in the prior-year quarter. Our model predicts SG&A expenses to be 9.5% of home sales revenues for the quarter, up from the year-ago level but down sequentially.
Meanwhile, we expect the company’s new orders to increase 9.4% year over year to 7,019 units in the quarter. Backlog is expected to decline 31.6% year over year to 13,122 units.
Overall Q2 Earnings & Revenue Expectations
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $2.47 per share, indicating a 9.5% decline from the year-ago figure of $2.73. Also, the consensus mark for revenues is $3.96 billion, suggesting 0.8% year-over-year growth.
PulteGroup, a Zacks Rank #2 (Buy) company, surpassed earnings estimates in 23 of the trailing 26 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 third-quarter fiscal 2023 (ended Jun 30, 2023) results, wherein earnings and revenues surpassed their respective Zacks Consensus Estimate.
On a year-over-year basis, although DHI’s earnings declined, revenues increased. Notably, the company highlighted that the supply of both new and existing homes at affordable price points remains limited, and demographics supporting housing demand remain favorable. This tailwind has helped this Arlington, TX-based homebuilder to witness net sales order growth of 37% year over year in the fiscal third quarter.
KB Home (KBH - Free Report) reported better-than-expected results for second-quarter fiscal 2023 (ended May 31, 2023). Both earnings and revenues beat the Zacks Consensus Estimate. The company’s earnings and revenues surpassed the consensus mark in two consecutive quarters.
KBH’s net orders grew 1% in the quarter to 3,936 units from the prior year. The value of net orders, however, was down 11% from the year-ago quarter to $1.9 billion due to lower ASP. Sequentially, net orders grew 84% in units and 90% in value, respectively.
Acuity Brands, Inc. (AYI - Free Report) reported mixed results for third-quarter fiscal 2023 (ended May 31, 2023), wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Earnings beat the consensus mark for the 13th consecutive quarter. Revenues missed the same for three quarters in a row following six straight quarters of beat.
Along with the earnings, AYI announced the completion of the acquisition of KE2 Therm. This will enable it to expand its Distech Brand by entering the commercial refrigeration control space.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.