Shares of PulteGroup Inc. (PHM) reached a 52-week high of $22.78 on Friday, May 03, 2013 gaining momentum from solid first quarter results announced on Apr 25. The closing price of the shares on May 03 was $22.32. The rate of return is 20.0%.
Share Price Drivers
PulteGroup reported strong first-quarter 2013 results on the back of double-digit increases in home sales, improved sales prices, gross margin expansion and solid overhead leverage.
PulteGroup’s first quarter 2013 adjusted earnings of 21 cents per share beat the Zacks Consensus Estimate by 31.3%. Earnings were significantly better than the prior-year quarter loss of 3 cents, driven by improved demand for homes.
PulteGroup reported 31.8% year-over-year increase in total revenue in the quarter, owing to double-digit revenue growth in the homebuilding segment. Total revenue beat the Zacks Consensus Estimate of $1.14 billion by 1.8%.
Pulte’s Homebuilding revenues, derived from popular brands like Pulte Homes, Centex and Del Webb, rose 32.9%, driven by an increase in new home orders and average selling prices.
The company benefited from stabilizing recovery in the housing market. This was backed by low interest rates and high affordability as renting became a more expensive option luring buyers to new homes. The company also witnessed strong gross margin expansion and solid overhead leverage during the quarter.
Adjusted homebuilding gross margins expanded 420 basis points (bps) from the prior-year quarter and 110 bps sequentially to 22.9% of home sales. It was driven by improved demand and pricing and better mix of sales (particularly of higher priced move-up homes).
Solid overhead leverage brought down selling, general and administrative expenses by 340 basis points to 11.8% of homebuilding revenues.
Based on the robust operational efficiency witnessed in the quarter and the assumption that the housing recovery will continue to gain momentum, the company increased its investment in land and development for 2013 and 2014 to 1.4 billion annually. The strong investment in land strengthens the company‘s position for the upcoming quarters when the demand for new homes is expected to be higher than supply.
The robust quarterly results and a promising outlook for the upcoming quarters led to an upward movement in estimates. In fact, the Zacks Consensus Estimate for 2013 and 2014 increased a respective 17.1% and 3.0% to $1.30 and $1.39 over the last 30 days.
PulteGroup carries a Zacks Rank #2 (Buy).
Other stocks in the homebuilding sector that are performing well and therefore deserve a mention include D. R. Horton Inc. (DHI), Ryland Group Inc. (RYL) and MDC Holdings Inc. (MDC). While D. R. Horton and Ryland Group carry a Zacks Rank #1 (Strong Buy), MDC holds Zacks Rank #2 (Buy).
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