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PulteGroup (PHM) Stock Gains on Q1 Earnings & Revenue Beat

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PulteGroup Inc.’s (PHM - Free Report) first-quarter 2019 earnings and revenues surpassed the respective Zacks Consensus Estimate. Shares of the company gained more than 4% in the pre-market trading session following the earnings release. The recent declines in mortgage rates have helped homebuyers to return to the market after a period of slowing demand that began in second-half 2018.

Earnings per share came in at 59 cents, beating the consensus mark of 47 cents by 25.5%. The bottom line was in line with the year-ago figure.

Total revenues of $1.99 billion outpaced the consensus mark and the year-ago figure of $1.97 billion.

Segment Discussion

PulteGroup primarily operates through two business segments — Homebuilding and Financial Services.

Revenues at the Homebuilding segment were up 1.5% year over year to $1.95 billion.

Moreover, home sale revenues of $1.95 billion rose 2% year over year on higher average selling price or ASP. Land sale revenues totaled $3 million compared with $12.6 million a year ago.

The number of homes closed grew by just 0.2% year over year to 4,635. Notably, home closings remained subdued across most of its operating regions (barring Florida and Texas), namely Northeast, Southeast, Midwest and West. ASP of homes delivered was $421,000, up 2% year over year.

Importantly, the company’s backlog, which represents orders yet to be closed, was 10,550, down 6.2% year over year. In addition, potential housing revenues from backlog decreased 6.8% from the prior-year quarter to $4.62 billion.

New home orders decreased 6% year over year to 6,463 units in the quarter. Home orders were down across all its operating regions barring Texas. Value of new orders also decreased to $2.7 billion from $2.9 billion a year ago.

PulteGroup, Inc. Price, Consensus and EPS Surprise

PulteGroup, Inc. Price, Consensus and EPS Surprise | PulteGroup, Inc. Quote

Margins

Home sale gross margin was down 20 basis points (bps) year over year to 23.4% in the quarter. Furthermore, operating margin contracted 50 bps to 10.5%.

Homebuilding SG&A expenses, as a percentage of home sale revenues, were 13%, up 40 bps from the prior-year quarter.

Revenues from the Financial Services segment declined 4.5% year over year to $43.9 million. The segment generated pre-tax income of $12 million, down from $14 million a year ago. Competitive operating conditions continue to impact overall pricing. Mortgage capture rate in the quarter was 80%, up from 78% in the year-ago period.

Financials

As of Mar 31, 2019, cash and cash equivalents were $1.1 billion, down from $1.11 billion at the end of 2018.

In the reported quarter, PulteGroup repurchased 0.9 million shares for $25 million.

Currently, the company has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Peer Releases

NVR, Inc. (NVR - Free Report) reported first-quarter 2019 adjusted earnings of $47.64 per share, beating the Zacks Consensus Estimate of $33.59 by 41.8%. Also, the reported figure increased 21% from the prior-year quarter.

KB Home’s (KBH - Free Report) first-quarter fiscal 2019 earnings of 31 cents per share outpaced the Zacks Consensus Estimate of 27 cents by 14.8%. Total revenues of $811.5 million, however, missed the consensus mark of $829.3 million.

Lennar Corporation (LEN - Free Report) reported first-quarter fiscal 2019 (ended Feb 28, 2019) results, wherein earnings and revenues missed the respective Zacks Consensus Estimate by 1.3% and 5.3%.

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