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Why Is PulteGroup (PHM) Up 23.8% Since Last Earnings Report?
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It has been about a month since the last earnings report for PulteGroup (PHM - Free Report) . Shares have added about 23.8% 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 catalysts.
PulteGroup Q3 Earnings Beat, Revenues Lag, Orders Up
PulteGroup Inc. reported mixed results in third-quarter 2023, wherein earnings surpassed the Zacks Consensus Estimates, but revenues missed the same. On the other hand, both metrics increased year over year.
The company has been banking on a 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 orders in the reported quarter and posted a 12-month return on equity of 30.1%.
Inside the Headlines
PHM reported adjusted earnings per share of $2.90, beating the consensus mark of $2.78 by 4.3% and increasing by 7.8% from $2.69 reported a year ago.
Total revenues of $4.004 billion missed the consensus mark of $4.044 billion by 1% but increased 2.8% from the year-ago figure of $3.895 billion.
Segment Discussion
PulteGroup primarily operates through two business segments — Homebuilding and Financial Services.
Revenues from the Homebuilding segment were up 2.7% year over year to $3.93 billion. Home sale revenues of $3.89 billion increased nearly 2.5% year over year, mainly due to the average price of homes closed. Land sale revenues rose 30.2% from a year ago to $39.9 million.
The number of homes closed increased slightly to 7,076 units from the year-ago level of 7,047 units. The average selling price of homes delivered was $549,000, up 2% year over year.
New home orders gained 43.5% year over year to 7,065 units for the quarter, benefiting from strong demand and an increased community count. The value of new orders also rose 36.2% from a year ago to $3.82 billion. The cancelation rate was 9% of the beginning backlog, down 350 basis points (bps) from the prior-year period.
Most importantly, its backlog, which represents orders yet to be closed, was 13,547 units, down 20.6% year over year. In addition, potential housing revenues from the backlog decreased by 23.2% from the prior-year quarter to $8.13 billion.
Home sales gross margin was down 100 bps year over year to 29.5% for the reported quarter. SG&A expenses (as a percentage of home sales revenues) improved 10 bps to 9.1% from 9.2% a year ago.
Revenues from the Financial Services segment increased 5.5% year over year to $76.7 million. Pretax income for the segment increased 5% to $29 million from a year ago.
Financials
At the end of the third quarter, cash, cash equivalents and restricted cash were $1.9 billion, up from $1.09 billion in 2022-end. Net debt-to-capital was 0.8% at the third quarter-end, significantly down from 9.6% at 2022-end.
Net cash provided by operating activities was $1.91 billion in the first nine months of 2023 versus net cash used in operating activities of $303.9 million in the prior year period.
In third-quarter 2023, the company repurchased 3.8 million common shares for $300 million at an average price of $79.84 per share.
Guidance
PHM projects to close approximately 8,000 homes in the fourth quarter and 29,000 homes this year. Earlier, it expected 29,500 homes to be delivered in 2023. The downside mainly reflects more challenging affordability conditions due to higher rates as well as the slight shift in its mix toward build-to-order homes, which won’t deliver until 2024. The ASP on these closings is likely to be within $540,000-$550,000. The company reported home closings of 8,848 for $571,000 ASP in the fourth quarter of the previous year and 29,111 for $542,000 ASP in 2022.
The company expects gross margin to be at the lower end of the 29-29.5% range for the fourth quarters versus 29.4% in the prior year. SG&A expense is now anticipated to be in the range of 8.8% in the fourth quarter, up from 8-8.5% expected earlier. SG&A expenses in the fourth quarter of the previous year were 7.1%.
It expects the tax rate for the remainder of 2023 to be 24.5%. The company still expects the community count to grow 5-10% in the fourth quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -6.13% due to these changes.
VGM Scores
At this time, PulteGroup has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, PulteGroup has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is PulteGroup (PHM) Up 23.8% Since Last Earnings Report?
It has been about a month since the last earnings report for PulteGroup (PHM - Free Report) . Shares have added about 23.8% 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 catalysts.
PulteGroup Q3 Earnings Beat, Revenues Lag, Orders Up
PulteGroup Inc. reported mixed results in third-quarter 2023, wherein earnings surpassed the Zacks Consensus Estimates, but revenues missed the same. On the other hand, both metrics increased year over year.
The company has been banking on a 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 orders in the reported quarter and posted a 12-month return on equity of 30.1%.
Inside the Headlines
PHM reported adjusted earnings per share of $2.90, beating the consensus mark of $2.78 by 4.3% and increasing by 7.8% from $2.69 reported a year ago.
Total revenues of $4.004 billion missed the consensus mark of $4.044 billion by 1% but increased 2.8% from the year-ago figure of $3.895 billion.
Segment Discussion
PulteGroup primarily operates through two business segments — Homebuilding and Financial Services.
Revenues from the Homebuilding segment were up 2.7% year over year to $3.93 billion. Home sale revenues of $3.89 billion increased nearly 2.5% year over year, mainly due to the average price of homes closed. Land sale revenues rose 30.2% from a year ago to $39.9 million.
The number of homes closed increased slightly to 7,076 units from the year-ago level of 7,047 units. The average selling price of homes delivered was $549,000, up 2% year over year.
New home orders gained 43.5% year over year to 7,065 units for the quarter, benefiting from strong demand and an increased community count. The value of new orders also rose 36.2% from a year ago to $3.82 billion. The cancelation rate was 9% of the beginning backlog, down 350 basis points (bps) from the prior-year period.
Most importantly, its backlog, which represents orders yet to be closed, was 13,547 units, down 20.6% year over year. In addition, potential housing revenues from the backlog decreased by 23.2% from the prior-year quarter to $8.13 billion.
Home sales gross margin was down 100 bps year over year to 29.5% for the reported quarter. SG&A expenses (as a percentage of home sales revenues) improved 10 bps to 9.1% from 9.2% a year ago.
Revenues from the Financial Services segment increased 5.5% year over year to $76.7 million. Pretax income for the segment increased 5% to $29 million from a year ago.
Financials
At the end of the third quarter, cash, cash equivalents and restricted cash were $1.9 billion, up from $1.09 billion in 2022-end. Net debt-to-capital was 0.8% at the third quarter-end, significantly down from 9.6% at 2022-end.
Net cash provided by operating activities was $1.91 billion in the first nine months of 2023 versus net cash used in operating activities of $303.9 million in the prior year period.
In third-quarter 2023, the company repurchased 3.8 million common shares for $300 million at an average price of $79.84 per share.
Guidance
PHM projects to close approximately 8,000 homes in the fourth quarter and 29,000 homes this year. Earlier, it expected 29,500 homes to be delivered in 2023. The downside mainly reflects more challenging affordability conditions due to higher rates as well as the slight shift in its mix toward build-to-order homes, which won’t deliver until 2024. The ASP on these closings is likely to be within $540,000-$550,000. The company reported home closings of 8,848 for $571,000 ASP in the fourth quarter of the previous year and 29,111 for $542,000 ASP in 2022.
The company expects gross margin to be at the lower end of the 29-29.5% range for the fourth quarters versus 29.4% in the prior year. SG&A expense is now anticipated to be in the range of 8.8% in the fourth quarter, up from 8-8.5% expected earlier. SG&A expenses in the fourth quarter of the previous year were 7.1%.
It expects the tax rate for the remainder of 2023 to be 24.5%. The company still expects the community count to grow 5-10% in the fourth quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -6.13% due to these changes.
VGM Scores
At this time, PulteGroup has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, PulteGroup has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.