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PulteGroup Inc.

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Building upon the strong first quarter performance, Pulte beat estimates for both earnings and sales in the second quarter. Adjusted earnings of $0.37 per share surged 61% year over year on the back of higher home sales and lower share count. Home sales rose 41% driven by higher ASPs and home closings. Notably, Pulte announced the next phase of its value-creation strategy at the call. Pulte will lower land spend and instead use the extra cash flow to drive greater overhead leverage and increase share buyback activity which will drive earnings growth. We are optimistic about Pulte’s second half performance backed by the steadily improving housing market, strong backlog position, focus on higher-return business and the recent Wieland acquisition. However, labor shortages and gross margin compression due to rising labor costs can keep the housing momentum in check in the second half.

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