Yahoo Finance PulteGroup (PHM) Up 1.7% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for PulteGroup (PHM). Shares have added about 1.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is PulteGroup due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
PulteGroup Q1 Earnings & Revenues Top, Orders Rise Y/Y
PulteGroup Inc. reported stellar results in first-quarter 2024, wherein earnings and revenues surpassed the Zacks Consensus Estimates.
Also, both metrics increased year over year on favorable demand conditions and its balanced operating model, which allows the company to more effectively meet the individual needs of first-time, move-up and active-adult consumers.
PHM’s president and CEO, Ryan Marshall, said, “Given PulteGroup’s broad operating platform and deep product portfolio, along with the powerful incentive programs we can offer to help improve the overall affordability equation, we are well positioned to expand our market share while helping to provide much needed new housing stock.”
Its solid first-quarter result helped the company to drive a return on equity of 27.3%.
Inside the Headlines
PHM reported adjusted earnings per share of $2.87, which topped the consensus mark of $2.36 by 21.6% and increased 22.1% from $2.35 reported a year ago. Total revenues of $3.95 billion beat the consensus mark of $3.59 billion by 10.1% and increased 10.4% from the year-ago figure of $3.58 billion.
Segment Discussion
PulteGroup primarily operates through two business segments — Homebuilding and Financial Services.
Revenues from the Homebuilding segment were up 9.6% year over year to $3.86 billion. Home sale revenues of $3.82 billion increased 9.5% year over year, mainly due to the solid homes closed. Land sale revenues rose 23.8% from a year ago to $37.2 million.
The number of homes closed increased 11% to 7,095 units from the year-ago level. The average selling price of homes delivered was $538,000, down 1.3% year over year.
New home orders gained 14% year over year to 8,379 units for the quarter, benefiting from higher gross orders and a lower cancelation rate. The value of new orders also rose 24% from a year ago to $4.7 billion. The cancelation rate was 10% of the beginning backlog, down 300 basis points (bps) from the prior-year period.
Most importantly, its backlog, which represents orders yet to be closed, was 13,430 units, up 2.3% year over year. In addition, potential housing revenues from the backlog increased 2.8% from the prior-year quarter to $8.2 billion.
Home sales gross margin was up 50 bps year over year to 29.6% in the reported quarter, backed by ongoing strength in homebuyer demand and a favorable geographic mix of homes closed. SG&A expenses (as a percentage of home sales revenues) improved 20 bps to 9.4% from 9.6% a year ago.
Revenues from the Financial Services segment increased 59.4% year over year to $92.4 million. Pretax income for the segment increased to $41 million from the year-ago figure of $14 million.
Financials
At the end of the first quarter, cash, cash equivalents and restricted cash were $1.77 billion, down from $1.85 billion in 2023-end. Net debt-to-capital was 1.7% at the first-quarter end, up from 1.1% at 2023-end. Net cash provided by operating activities was $239.8 million in the first quarter compared with $711.4 million in the prior-year period. In the reported quarter, the company repurchased 2.3 million common shares for $246 million at an average price of $106.73 per share.
Guidance
For the second quarter, the company expects to close between 7,800 and 8,200 homes, up from 7,518 homes reported in the prior-year period.
Backed by strong orders and closings, PHM raised its full-year closings guidance to nearly 31,000 homes from 30,000 units expected earlier, reflecting an 8% increase year over year. Notably, the company is heading toward its long-term goal of growing closing volume between 5% and 10% annually. ASP is still expected to be in the range of $540,000-$550,000 for each quarter in 2024.
For the second quarter, it projects gross margin to be 29.2%, and for both third and fourth quarters, it is likely to be 29%, versus the previous guidance of 28-28.5% for each quarter. In the previous year, PulteGroup reported gross margin of 29.6%, 29.5 and 28.9% in the second, third and fourth quarters, respectively. SG&A for the year is expected to range in 9.2-9.5% of home sales, up from 8.4% in 2023. For the rest of 2024, the company expects tax rate to be in the range of 24-24.5%.
PulteGroup continues to expect the average community count to rise in the range of 3-5% in each quarter of 2024.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 6.45% due to these changes.
VGM Scores
At this time, PulteGroup has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise PulteGroup has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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PulteGroup, Inc. (PHM) : Free Stock Analysis Report
