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PulteGroup (PHM) Home Sales to Decline Y/Y in Q4 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 decreased year over year when PHM reports fourth-quarter 2023 results on Jan 30.
PulteGroup has exhibited a solid performance over the past six months, with the stock rising 25.6%, outperforming the Zacks Building Products - Home Builders industry’s 14.7% increase. It has been benefiting from its focus on entry-level buyers and liquidity protection, prudent management of cash flows and land investment strategy.
Click here to know how the company’s overall fourth-quarter performance is expected to be.
Image Source: Zacks Investment Research
A Look at Q4 Segmental Performance
PulteGroup's Homebuilding segment is anticipated to have reflected the effects of rising mortgage rates compared with the previous year. Also, the slight shift in its mix toward build-to-order homes (which won’t deliver until 2024) is an added headwind for the quarter. However, the persistent scarcity of available existing homes in the market has been fueling the desire for new homes. This surge in demand is expected to have mitigated the headwind to some extent. Additionally, PulteGroup's judicious land investment approach and its emphasis on catering to entry-level buyers are projected to have worked in the company's favor during the fourth quarter.
Our model predicts Homebuilding revenues to decrease 11.4% to $4.43 billion in the fourth quarter from $5.01 billion in the fourth quarter of 2022 but an increase from $93 billion in the prior quarter. Within the Homebuilding umbrella, we expect home sales to be $4.39 billion, reflecting an 11.6% year-over-year decline but an increase of 12.8% sequentially. Land sales are expected to rise 3.6% year over year to $47.2 million in the fourth quarter and 18.2% sequentially.
PulteGroup expects home deliveries to be approximately 8,000 units compared with 8,848 homes delivered a year ago. Our model predicts deliveries to decline 9.5% year over year to 8,011 units. The decrease reflects the impact of rising mortgage rates.
PHM expects an average selling price or ASP for the quarter between $540,000 and $550,000 compared with the year-ago level of $571,000. Our model predicts the ASP of homes delivered to inch down 4.1% year over year to $547,600.
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 29%-29.5% for fourth-quarter 2023 from 29.4% 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 29.4% for the quarter, the same as the year-ago period.
PulteGroup anticipates SG&A (as a percentage of home sales revenues) in the range of 8.8%, lower than 9.1% reported in the prior-year quarter. Our model predicts homebuilding SG&A expenses to be 8.8% for the quarter, up from the year-ago level.
Meanwhile, we expect the company’s new orders to increase 64% year over year to 6,500 units in the quarter but decrease 8% sequentially. Backlog is expected to decline 1.1% year over year to 12,036 units.
Overall Q4 Earnings & Revenue Expectations
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $3.20 per share, indicating an 11.9% decline from the year-ago figure of $3.63. Also, the consensus mark for revenues is $4.48 billion, suggesting a 13.3% year-over-year decrease.
D.R. Horton, Inc. (DHI - Free Report) reported first-quarter fiscal 2024 (ended Dec 31, 2023) results, wherein earnings missed the Zacks Consensus Estimate, but revenues surpassed the same.
DHI reported adjusted earnings of $2.82 per share for the fiscal first quarter, which missed the Zacks Consensus Estimate of $2.88 by 2.1% but improved 2% from the year-ago figure of $2.76. Total revenues (Homebuilding, Forestar, Rental and Financial Services) came in at $7.73 billion, up 6.5% year over year. The reported figure topped the consensus mark of $7.72 billion by 1.4%.
KB Home (KBH - Free Report) reported better-than-expected results in fourth-quarter fiscal 2023 (ended Nov 30, 2023). Both the earnings and revenues beat the Zacks Consensus Estimate. With this, the company’s earnings and revenues surpassed the consensus mark in four consecutive quarters.
Looking forward to the first quarter and the entirety of 2024, KBH foresees enhanced conditions in the housing market and ongoing positive trends in the supply chain. Leveraging the advantages of its Built to Order model, which provides buyers with choices, flexibility, and affordability, the company is confident in its ability to effectively navigate potential fluctuations in housing market conditions.
Acuity Brands, Inc. (AYI - Free Report) reported impressive results in first-quarter fiscal 2024 (ending Nov 30, 2023), with earnings and revenues surpassing the Zacks Consensus Estimate. Earnings beat the consensus mark for the 15th consecutive quarter.
Despite a year-over-year decline in sales in the lighting business, AYI reported strong fiscal first-quarter performance driven by increased focus on margins and cash generation. This approach resulted in a higher adjusted operating profit margin and increased adjusted diluted earnings per share.
Image: Bigstock
PulteGroup (PHM) Home Sales to Decline Y/Y in Q4 Earnings
PulteGroup, Inc.’s (PHM - Free Report) Homebuilding segment, accounting for more than 98% of total revenues, is expected to have decreased year over year when PHM reports fourth-quarter 2023 results on Jan 30.
PulteGroup has exhibited a solid performance over the past six months, with the stock rising 25.6%, outperforming the Zacks Building Products - Home Builders industry’s 14.7% increase. It has been benefiting from its focus on entry-level buyers and liquidity protection, prudent management of cash flows and land investment strategy.
Click here to know how the company’s overall fourth-quarter performance is expected to be.
Image Source: Zacks Investment Research
A Look at Q4 Segmental Performance
PulteGroup's Homebuilding segment is anticipated to have reflected the effects of rising mortgage rates compared with the previous year. Also, the slight shift in its mix toward build-to-order homes (which won’t deliver until 2024) is an added headwind for the quarter. However, the persistent scarcity of available existing homes in the market has been fueling the desire for new homes. This surge in demand is expected to have mitigated the headwind to some extent. Additionally, PulteGroup's judicious land investment approach and its emphasis on catering to entry-level buyers are projected to have worked in the company's favor during the fourth quarter.
Our model predicts Homebuilding revenues to decrease 11.4% to $4.43 billion in the fourth quarter from $5.01 billion in the fourth quarter of 2022 but an increase from $93 billion in the prior quarter. Within the Homebuilding umbrella, we expect home sales to be $4.39 billion, reflecting an 11.6% year-over-year decline but an increase of 12.8% sequentially. Land sales are expected to rise 3.6% year over year to $47.2 million in the fourth quarter and 18.2% sequentially.
PulteGroup expects home deliveries to be approximately 8,000 units compared with 8,848 homes delivered a year ago. Our model predicts deliveries to decline 9.5% year over year to 8,011 units. The decrease reflects the impact of rising mortgage rates.
PHM expects an average selling price or ASP for the quarter between $540,000 and $550,000 compared with the year-ago level of $571,000. Our model predicts the ASP of homes delivered to inch down 4.1% year over year to $547,600.
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 29%-29.5% for fourth-quarter 2023 from 29.4% 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 29.4% for the quarter, the same as the year-ago period.
PulteGroup anticipates SG&A (as a percentage of home sales revenues) in the range of 8.8%, lower than 9.1% reported in the prior-year quarter. Our model predicts homebuilding SG&A expenses to be 8.8% for the quarter, up from the year-ago level.
Meanwhile, we expect the company’s new orders to increase 64% year over year to 6,500 units in the quarter but decrease 8% sequentially. Backlog is expected to decline 1.1% year over year to 12,036 units.
Overall Q4 Earnings & Revenue Expectations
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $3.20 per share, indicating an 11.9% decline from the year-ago figure of $3.63. Also, the consensus mark for revenues is $4.48 billion, suggesting a 13.3% year-over-year decrease.
PulteGroup, a Zacks Rank #2 (Buy) company, surpassed earnings estimates in 25 of the trailing 28 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 first-quarter fiscal 2024 (ended Dec 31, 2023) results, wherein earnings missed the Zacks Consensus Estimate, but revenues surpassed the same.
DHI reported adjusted earnings of $2.82 per share for the fiscal first quarter, which missed the Zacks Consensus Estimate of $2.88 by 2.1% but improved 2% from the year-ago figure of $2.76. Total revenues (Homebuilding, Forestar, Rental and Financial Services) came in at $7.73 billion, up 6.5% year over year. The reported figure topped the consensus mark of $7.72 billion by 1.4%.
KB Home (KBH - Free Report) reported better-than-expected results in fourth-quarter fiscal 2023 (ended Nov 30, 2023). Both the earnings and revenues beat the Zacks Consensus Estimate. With this, the company’s earnings and revenues surpassed the consensus mark in four consecutive quarters.
Looking forward to the first quarter and the entirety of 2024, KBH foresees enhanced conditions in the housing market and ongoing positive trends in the supply chain. Leveraging the advantages of its Built to Order model, which provides buyers with choices, flexibility, and affordability, the company is confident in its ability to effectively navigate potential fluctuations in housing market conditions.
Acuity Brands, Inc. (AYI - Free Report) reported impressive results in first-quarter fiscal 2024 (ending Nov 30, 2023), with earnings and revenues surpassing the Zacks Consensus Estimate. Earnings beat the consensus mark for the 15th consecutive quarter.
Despite a year-over-year decline in sales in the lighting business, AYI reported strong fiscal first-quarter performance driven by increased focus on margins and cash generation. This approach resulted in a higher adjusted operating profit margin and increased adjusted diluted earnings per share.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.