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PulteGroup (PHM) Q3 Earnings & Revenues Beat, Shares Up

Zacks Equity Research

PulteGroup Inc.’s PHM shares gained 2.8% after it reported third-quarter 2019 results, wherein earnings and revenues surpassed the respective Zacks Consensus Estimate. Higher demand owing to favorable housing dynamics backed by lower interest rates and improved affordability had a positive impact on PulteGroup’s performance in the quarter.

The company remains confident about upbeat housing demand for the remainder of 2019, given expectations for lower interest rates, and improvement in macroeconomic backdrop.

Inside the Headlines

Earnings per share came in at $1.01, beating the consensus mark of 92 cents by 9.8%. The bottom line, however, was flat year over year.

Total revenues of $2.71 billion outpaced the consensus mark of $2.6 billion by 4.1% and increased 2.3% from the year-ago figure of $2.65 billion.

PulteGroup, Inc. Price, Consensus and EPS Surprise

PulteGroup, Inc. Price, Consensus and EPS Surprise

PulteGroup, Inc. price-consensus-eps-surprise-chart | PulteGroup, Inc. Quote

Segment Discussion

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

Revenues from the Homebuilding segment were up 1.8% year over year to $2.65 billion.

Moreover, home sale revenues of $2.64 billion improved 2.5% year over year, given higher deliveries. Land sale revenues dropped 66.5% to $8.5 million from $25.5 million a year ago.

The number of homes closed increased 3% year over year to 6,186. Notably, home closings grew across most of the operating regions served (barring Southeast and Midwest). ASP of homes delivered was $426,000, down 0.2% year over year.

Importantly, the company’s backlog — which represents orders yet to be closed — was 11,638, up 4.2% year over year. In addition, potential housing revenues from backlog increased 2% from the prior-year quarter to $5.01 billion.

Moreover, new home orders increased 12.7% year over year to 6,031 units in the quarter. Home orders were up across all operating regions served. Value of new orders also grew 11.4% from a year ago to $2.54 billion.

Margins

Adjusted home sales gross margin was down 60 basis points (bps) year over year to 23.4% in the quarter. Furthermore, operating margin contracted 140 bps to 12.8%.

Homebuilding SG&A expenses — as a percentage of home sale revenues — were 10.3%, up 50 bps from the prior-year quarter.

Revenues from the Financial Services segment improved 25.6% year over year to $64.8 million. The segment generated pre-tax income of $32 million, up 64% from a year ago. Mortgage capture rate in the quarter was 84%, reflecting an increase from 75% in the year-ago period.

Financials

As of Sep 30, 2019, cash and cash equivalents were $737 million, down from $1.11 billion at the end of 2018.

In the reported quarter, PulteGroup repurchased 4.1 million shares for $136 million.

Currently, the company has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Peer Releases

NVR, Inc. NVR reported solid results in third-quarter 2019. The company’s earnings not only surpassed the Zacks Consensus Estimate but also improved on a year-over-year basis.

Lennar Corporation LEN reported better-than-expected results in third-quarter fiscal 2019 (ended Aug 31, 2019). The results mainly benefited from a solid resurgence in demand for new homes, depicting a healthy economy and declining borrowing costs.

KB Home KBH reported third-quarter fiscal 2019 results, wherein earnings beat analysts’ expectation but revenues missed the same. The results mainly benefited from continued progress of the Returns-Focused Growth plan, given stellar average community count growth. Although the company’s top and bottom lines declined on a year-over-year basis, it remains upbeat about improvement in fiscal fourth-quarter results.

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