Yahoo Finance PulteGroup Inc (PHM) Q1 2024 Earnings Call Transcript Highlights: Strong Growth and Strategic ...
Revenue: $3.8 billion, a 10% increase from the previous year's first quarter.
Gross Margin: 29.6%, up from 29.1% in the previous year.
Net Income: $663 million, up from $533 million in the previous year.
Earnings Per Share (EPS): $3.10, compared to $2.35 in the previous year.
Return on Equity: 27.3% for the trailing 12-month period.
Closings: 7,095 homes, an 11% increase year-over-year.
Average Sales Price (ASP): $538,000, a slight decrease due to geographic mix.
Backlog: 13,430 homes valued at $8.2 billion.
SG&A Expenses: $358 million, representing 9.4% of home sale revenues.
Financial Services Income: $41 million, nearly a 200% increase from the previous year.
Land Investment: Approximately $1.1 billion in Q1, with a full-year plan of about $5 billion.
Community Count: 931, a 6% increase year-over-year.
Release Date: April 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Impressive results, and I appreciate all the guidance that you provided. I guess my first question relates to your longer-term targets with respect to land. Ryan, I think the last time I asked you this question, I was curious about sort of where your long-term target is, and I think I stated it in terms of year zones. I understand that you want to have about 7 years controlled with about 30% options over the long term. That would put you at about a little over 2 years of owned land. You're quite a bit above that now? And so my question is, am I thinking about that right? Is your long-term target for owned land a little over 2-year zoned? And over what time span do you think we should expect you to migrate to that, if that is, in fact, your target? A: Yes, Stephen, thanks for the question. I think your overall target of 7 years control is about right. And then we stated our long-term target of optionality at 70%. We do think it will be a multiyear journey in getting there. And that's really driven by the fact, Stephen, that we want to do it in a very organic, natural way that drives ideal economics for each individual transaction. We highlighted in the prepared remarks, Bob did, that in the quarter, 74% of the deals that we approved were under option. We think that type of activity over the next several years will have us arrive at our long-term target in a very natural way. When we do that, to your point, we'll be right around something just over 2, 2.5 years of owned land at that point.
Q: So in the fourth quarter, you, as you mentioned, sort of didn't raise incentives to chase volume. Now speaking to rates being higher for longer, eventually we'll be past the peak of the spring demand and all that. So I guess going forward, how are you thinking about that trade-off with incentives from here? Given where your margins are, is there an opportunity to perhaps trade a little bit of that margin to drive better growth, obviously, in the context of supporting returns? A: Matt, it's Ryan. Thanks for the question. We've said it in the past, we're not going to be margin proud, and I would tell you that remains true. As we highlighted in some of my prepared remarks today, we believe our operating platform and how we've positioned our specific community investments, we're in a great position to command excellent pricing, get pace and price, which you saw in this most recent quarter. We -- given the interest rate environment that we are clearly going into higher for longer, we've got the ability to use the very powerful tool of forward mortgage rate commitments that allow us to offer a pretty attractive incentive program. Right now, we're at 5.75% nationally, and about 25% of our buyers are taking advantage of it.
Q: I think this is the first time since mid-2020 when you haven't addressed construction cycle time. So I thought at least I'd ask. Across the markets, products and geographic markets, are cycle times effectively normalized now for you? Or are we still a little bit longer than you were pre-COVID? A: Carl, thanks for the question. We saw a couple of days of cycle time improvement in the most recent quarter. So we were at 128 days, down from the 130 that we ended the fourth quarter of 2023 in. We are still on track and still are targeting being at 100 days by the end of the year. When we look deeper at our Q1 numbers, we had some long cycle to closings that had been in production for a long time, in many cases, were multifamily and condo buildings, that we think kept the overall number that I just shared with you of 128 days a higher -- a little bit higher than what we think is our actual run rate at this point.
Q: I was wondering if you could talk about maybe the potential impact of the NAR settlement on your business or maybe the broader industry, and any kind of potential secondary impacts to Pulte? A: Yes, Anthony, we're watching it closely, as I think a lot of the real estate world is. Where we think it ultimately goes is it will create better transparency around the fee structure and will likely change over time the way that the providers of those services charge the users or the consumers of those services ultimately pay. So we -- realtors are an important part of our business, and over probably 60% of the sales that we have include a buy-side realtor involved. So we certainly support the realtor community. They've been an important part of our company for a long time. But we are watching the way that the landscape there will certainly change.
Q: Thanks for the incremental color on April, especially the traffic detail. I mean it definitely makes sense that the Centex buyer is a bit more rate clash payment sensitive. But I wanted to drill down on this a bit more and maybe see if you had any perspective on traffic across other parts of your business, that 60% that's kind of active adult and move-up? And what you're seeing from that buyer cohort, if anything, as rates move? A: Sam, we don't -- we're not parsing the traffic data quite that finally for the purpose of this call. One other data point that I will tell you, while we've seen traffic into the stores moderate over the last several days, traffic to the website has been incredibly strong. So we still think that there's high buyer demand and desire for homeownership. Certainly, anytime there's rate fluctuations, that can cause some disruption in buyer behavior. But we think the fundamental or the overall demand for housing remains incredibly strong, and we're still in a very supply-constrained environment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
