Yahoo Finance PulteGroup (PHM) Reaches 52-Week High: Factors to Consider
PulteGroup, Inc. PHM touched a new 52-week high of $68.88 on May 12, 2023. The stock pulled back to end the trading session at $68.43, up 0.46% from the previous day’s closing price of $68.12.
Apart from PHM, Taylor Morrison Home Corporation TMHC, Beazer Homes USA, Inc. BZH and M/I Homes MHO also reached new 52-week highs of $44.16, $21.75 and $70.84 on May 12. However, all three stocks pulled back to end the trading session, down by 0.8%, 3.6% and 1.66%, respectively, from the previous day’s closing price.
The uptrend in investors’ sentiments might have been boosted by the latest Producer Price Index, published by the U.S. Bureau of Labor Statistics, which shows a 0.2% decline in building materials prices in April 2023.
PHM Stock Performance
PHM has gained 50.3% so far this year compared with the Zacks Building Products - Home Builders industry’s 30.4% growth, the Zacks Construction sector’s 13.6% riseand the S&P 500 Index’s 8.4% rally.
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The company has been riding on land acquisition strategies and focusing on entry-level buyers. Also, business expansion via community openings in various locations bodes well. The company regularly raises shareholders’ value via repurchases and dividend distribution, which also boosts investors’ sentiment.
Despite a challenging sales environment, higher cancellation rates, supply-chain issues and significant inflation, the improving interest rate environment is raising hope.
Let’s delve deeper into the factors influencing this Zacks Rank #1 (Strong Buy) company.
Growth Driving Factors
Strong Q1 Results: PulteGroup started 2023 on an impressive note. The company’s first-quarter 2023 earnings and revenues surpassed the respective Zacks Consensus Estimate and increased year over year. The company witnessed solid gross orders, closings and margins in the quarter, as well as a 28% increase in earnings per share (EPS) and a 12-month return on equity of 32%. The solid EPS was driven by a 13.5% increase in revenues, improved gross margins and overhead leverage. The number of homes closed increased 6% from the year-ago level to 6,394 units. The average selling price of homes delivered was $545,000, up 9% year over year.
Land Strategy: PulteGroup’s land acquisition strategies aim at improving volumes, revenues and profitability on an annual basis. In 2022 and 2021, the company spent $4.5 billion and $4.2 billion on land acquisition and development, respectively. The trend continued in first-quarter 2023, when it spent $906 million on land acquisition and development.
PHM currently expects land spending to increase materially in 2023. It expects the land acquisition and development spend in 2023 to be within $3.5-$4 billion, up from the previously considered value of $3.3 billion. Of these, it estimates 65% will go toward developing owned land positions.
Apart from this, PulteGroup’s land strategy emphasizes investing in shorter-lived, smaller land assets while expanding the use of land option agreements when possible, thereby mitigating market risk. Consistent with its efforts to improve overall asset efficiency and reduce land risks by optioning lots, the company has successfully reduced its owned land. It ended the first quarter of 2023 with 210,355 lots under control, of which 48.9% were controlled via option.
First-Time/Entry-Level Buyers: PulteGroup remains focused on the growing demand for entry-level homes, which aim at lower-priced homes, given affordability concerns prevailing in the U.S. housing market. First-time buyers increased 18% to 3,177 homes for the first quarter of 2023. It comprised 39% of first-timers, 35% of move-ups and 26% of active adults. The shift from mix to first-time is in line with its strategy of having more than one-third of business in the first-time buyer space.
Rapid Community Openings: The company recently announced community openings in various locations. On Mar 16, it unveiled a new community in Louisville, The Trails at Belmond. On Mar 8, it introduced expansion in the Greenville market with three new construction communities within its Pulte Homes brand. The first community, Indigo Park, is in Easley and is likely to open this summer. The second community — Briarwood Reserve in Spartanburg — is set to open in late 2023. The last one, Alston Park in Greenville, is expected to open in early 2024.
Driving Shareholder Value: PHM has been paying quarterly dividends for nearly four decades. It has consistently focused on sharing its cash flows with shareholders and maintaining a solid financial position. In December 2022, it announced a quarterly dividend hike of 7% to 16 cents per share. This was payable on Jan 3, 2023, to shareholders of record at the close of business on Dec 14, 2022.
PHM repurchased 2.8 million shares in first-quarter 2023 for $150 million. At the end of first-quarter 2023, PHM declared cash dividends of $36.1 million. As of Mar 31, 2023, the company had $232.9 million remaining in authorization. On Apr 24, 2023, its board of directors increased the share repurchase authorization by $1 billion.
Discussion of Above-Mentioned Stocks
Taylor Morrison’s ongoing operational enhancements, acquisition synergies and robust pricing power have more than offset the inflationary pressure and delays in some closings. The company’s well-balanced, diverse mix of portfolio and operating strategy is encouraging. TMHC has expanded its market footprint and product positioning in recent years through acquisitions and impressive organic growth, thereby serving a broad range of consumers in the entry-level, first- and second-move-up and resort lifestyle segments across the country. The success of its efforts has been driving growth for the company and enhancing its liquidity level, enabling it to take advantage of investment opportunities as the market evolves.
TMHC currently holds a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for its 2023 earnings has been upwardly revised to $6.80 per share from $6.46 per share over the past 30 days.
Beazer Homes designs, builds and sells single-family homes. BZH designs homes to appeal primarily to entry-level and first move-up home buyers. Beazer Homes’objective is to provide customers with homes that incorporate quality and value.
BZH presently sports a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 25.1%, on average. In the past 30 days, estimates for Beazer Homes’ fiscal 2023 (ending September 2023) earnings have increased 39 cents.
M/I Homes is one of the nation's leading builders of single-family homes. The company designs, markets, constructs and sells single-family homes and attached townhomes to first-time, move-up, empty-nester and luxury buyers. At present, the stock sports a Zacks Rank #1.
The Zacks Consensus Estimate for M/I Homes’ current-year earnings has moved up to $12.40 per share from $11.12 in the past 30 days. MHO surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 30%.
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PulteGroup, Inc. (PHM) : Free Stock Analysis Report
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