We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
PulteGroup (PHM) Down 5.5% Since Last Earnings Report: Can It Rebound?
Read MoreHide Full Article
It has been about a month since the last earnings report for PulteGroup (PHM - Free Report) . Shares have lost about 5.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is PulteGroup due for a breakout? 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 Q2 Earnings Beat, Orders Up on Strong Demand
PulteGroup Inc. reported impressive results in second-quarter 2023. Its earnings and revenues surpassed their respective Zacks Consensus Estimates and increased year over year. The upside was mainly driven by its solid operating model, which strategically aligns the production of build-to-order and quick-move-in homes with applicable demand across consumer groups.
Backed by its disciplined and balanced business model, the company witnessed solid gross closings, orders and margins in the reported quarter and posted a 12-month return on equity of 32%.
Inside the Headlines
Adjusted earnings per share came in at $3.00, topping the consensus mark of $2.47 by 21.5% and increasing by 9.9% from $2.73 reported a year ago.
Total revenues of $4.19 billion also beat the consensus mark of $3.96 billion by 5.9% and increased 8% from the year-ago figure of $3.88 billion.
Segment Discussion
PulteGroup primarily operates through two business segments — Homebuilding and Financial Services.
Revenues from the Homebuilding segment were up 7.9% year over year to $4.1 billion. Home sale revenues of $4.06 billion increased nearly 8% year over year, mainly due to the higher closings and average price of homes closed. Land sale revenues also rose 11.2% from a year ago to $37.6 million.
The number of homes closed increased 5% from the year-ago level to 7,518 units. The average selling price (ASP) of homes delivered was $540,000, up 3% year over year.
Most importantly, its backlog, which represents orders yet to be closed, was 13,558 units, down 29.3% year over year. In addition, potential housing revenues from backlog decreased by 29.5% from the prior-year quarter to $8.2 billion.
New home orders gained 23.8% year over year to 7,947 units for the quarter, benefiting from strong demand and an increased community count. The value of new orders also rose 9.4% from a year ago to $4.3 billion. The cancelation rate was 9% of the beginning backlog, down 350 basis points (bps) from the previous-year period.
Home sales gross margin was down 170 bps year over year to 29.6% for the reported quarter. The metric was up 50 bps sequentially, backed by favorable demand and improved pricing on spec sales. SG&A expenses (as a percentage of home sales revenues) improved 50 bps to 7.8% from 9.3% a year ago.
Revenues from the Financial Services segment increased 11.4% year over year to $92.2 million. Pretax income for the segment increased 16% to $46 million from a year ago.
Financials
At the end of the second quarter, cash, cash equivalents and restricted cash were $1.78 billion, up from $1.09 billion in 2022-end. Net debt-to-capital was 2.6% at second quarter-end, significantly down from 9.6% at 2022-end.
Net cash provided by operating activities was $1.45 billion in the first half of 2023 versus $102.3 million in the first half of 2022.
In second-quarter 2023, the company repurchased 3.7 million common shares for $250 million at an average price of $68.31 per share.
Guidance
PHM projects to close 7000-7,400 homes in the third quarter and 29,500 homes this year. The delivery targets are mainly benefiting from improved home construction cycle times. The ASP on these closings is likely to be nearly $540,000. In the previous year, the company reported home closings of 7,047 for $545,000 ASP in the third quarter and 29,111 for $542,000 ASP in 2022.
The company expects gross margin to be within 29-29.5% for both the third and fourth quarters of this year. Gross margins in the third and fourth quarters of 2022 were 30.3% and 29.4%, respectively. SG&A expense is anticipated to be in the range of 9-9.5% of home sale revenues in the third quarter and 8-8.5% in the fourth quarter. SG&A expense in the third and fourth quarters of the previous year were 9.2% and 7.1%, respectively.
It expects the tax rate for the remainder of 2023 to be 24.5%.
The company still expects community count to grow 5-10% in the third and fourth quarters.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 32.5% due to these changes.
VGM Scores
Currently, PulteGroup has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
PulteGroup (PHM) Down 5.5% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for PulteGroup (PHM - Free Report) . Shares have lost about 5.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is PulteGroup due for a breakout? 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 Q2 Earnings Beat, Orders Up on Strong Demand
PulteGroup Inc. reported impressive results in second-quarter 2023. Its earnings and revenues surpassed their respective Zacks Consensus Estimates and increased year over year. The upside was mainly driven by its solid operating model, which strategically aligns the production of build-to-order and quick-move-in homes with applicable demand across consumer groups.
Backed by its disciplined and balanced business model, the company witnessed solid gross closings, orders and margins in the reported quarter and posted a 12-month return on equity of 32%.
Inside the Headlines
Adjusted earnings per share came in at $3.00, topping the consensus mark of $2.47 by 21.5% and increasing by 9.9% from $2.73 reported a year ago.
Total revenues of $4.19 billion also beat the consensus mark of $3.96 billion by 5.9% and increased 8% from the year-ago figure of $3.88 billion.
Segment Discussion
PulteGroup primarily operates through two business segments — Homebuilding and Financial Services.
Revenues from the Homebuilding segment were up 7.9% year over year to $4.1 billion. Home sale revenues of $4.06 billion increased nearly 8% year over year, mainly due to the higher closings and average price of homes closed. Land sale revenues also rose 11.2% from a year ago to $37.6 million.
The number of homes closed increased 5% from the year-ago level to 7,518 units. The average selling price (ASP) of homes delivered was $540,000, up 3% year over year.
Most importantly, its backlog, which represents orders yet to be closed, was 13,558 units, down 29.3% year over year. In addition, potential housing revenues from backlog decreased by 29.5% from the prior-year quarter to $8.2 billion.
New home orders gained 23.8% year over year to 7,947 units for the quarter, benefiting from strong demand and an increased community count. The value of new orders also rose 9.4% from a year ago to $4.3 billion. The cancelation rate was 9% of the beginning backlog, down 350 basis points (bps) from the previous-year period.
Home sales gross margin was down 170 bps year over year to 29.6% for the reported quarter. The metric was up 50 bps sequentially, backed by favorable demand and improved pricing on spec sales. SG&A expenses (as a percentage of home sales revenues) improved 50 bps to 7.8% from 9.3% a year ago.
Revenues from the Financial Services segment increased 11.4% year over year to $92.2 million. Pretax income for the segment increased 16% to $46 million from a year ago.
Financials
At the end of the second quarter, cash, cash equivalents and restricted cash were $1.78 billion, up from $1.09 billion in 2022-end. Net debt-to-capital was 2.6% at second quarter-end, significantly down from 9.6% at 2022-end.
Net cash provided by operating activities was $1.45 billion in the first half of 2023 versus $102.3 million in the first half of 2022.
In second-quarter 2023, the company repurchased 3.7 million common shares for $250 million at an average price of $68.31 per share.
Guidance
PHM projects to close 7000-7,400 homes in the third quarter and 29,500 homes this year. The delivery targets are mainly benefiting from improved home construction cycle times. The ASP on these closings is likely to be nearly $540,000. In the previous year, the company reported home closings of 7,047 for $545,000 ASP in the third quarter and 29,111 for $542,000 ASP in 2022.
The company expects gross margin to be within 29-29.5% for both the third and fourth quarters of this year. Gross margins in the third and fourth quarters of 2022 were 30.3% and 29.4%, respectively. SG&A expense is anticipated to be in the range of 9-9.5% of home sale revenues in the third quarter and 8-8.5% in the fourth quarter. SG&A expense in the third and fourth quarters of the previous year were 9.2% and 7.1%, respectively.
It expects the tax rate for the remainder of 2023 to be 24.5%.
The company still expects community count to grow 5-10% in the third and fourth quarters.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 32.5% due to these changes.
VGM Scores
Currently, PulteGroup has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
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.