Must-know: Why PulteGroup reports flat revenues
Must-know: PulteGroup's 2Q14 earnings report (Part 2 of 5)
PulteGroup reports flat revenues
PulteGroup (PHM) reported second quarter revenues of $1.2 billion, which missed the Wall Street estimate of $1.33 billion. Sales were up 14% on a sequential basis and up 50 basis points on a year-over-year (or YoY) basis. The homebuilding business is highly seasonal, so investors shouldn’t read anything into the quarter-over-quarter comparisons. The increase in revenues was driven by a 12% increase in average selling prices, which offset a 9% drop in closings. The increase in average selling prices reflects both price increases and a product mix more skewed towards the move-up buyer.
Orders declined 2% on a unit basis, to 4,778 net new orders from 4,885 the year before. The dollar value of new orders increased 5%, to $1.6 billion. At the end of the year, the backlog was 8,179 homes, valued at $2.8 billion, compared to a prior-year backlog of 8,558 homes valued at $2.7 billion. The average selling price of their backlog increased to $339,000.
Pulte’s take on the state of the housing market
Richard Dugas, chairman and chief executive officer said “Our view of the U.S. housing market remains positive, as improvements in both the economy and employment provide ongoing support to an industry already benefiting from low inventory, low mortgage rates, better pricing, and favorable demographic trends.”
So far, Lennar (LEN), NVR (NVR), and KB Home (KBH) have reported good numbers. D.R. Horton (DHI) missed.
Expansion plans for the future
PulteGroup noted strength in the active adult segment and plans to devote more resources to that segment. Also, the company increased its planned land acquisitions to $2 billion for 2014. While first-time homebuyers tend to be an important segment for PulteGroup, they remain underrepresented currently. As a result, Pulte is focusing more on other segments—particularly the move-up buyer and the active adult buyer. Finally, Pulte noted a geographic shift. California and the West Coast in general seem to be cooling, while the Midwest and the Northeast are picking up.
Browse this series on Market Realist:
