PulteGroup's (PHM) Q3 Earnings Beat Estimates, Revenues Rise

PulteGroup Inc. PHM reported impressive third-quarter 2018 results, with earnings and revenues beating the Zacks Consensus Estimate. Moreover, the company’s top and bottom lines grew considerably, courtesy of higher revenues and margin improvement.

While concerns surrounding affordability and rising mortgage rates have been plaguing the industry of late, PulteGroup remains positive on ongoing traffic trends that indicate higher inclination of buyers, thereby reflecting a slow but steady housing recovery.

The company’s earnings per share came in at $1.01, beating the consensus mark of 95 cents. The bottom line also improved 74% on a year-over-year basis. The results benefited from higher demand, backed by an improving economy and job market.

Total revenues of $2.65 billion surpassed the consensus mark of $2.60 billion and also increased 24.3% on a year-over-year basis.

 

PulteGroup, Inc. Price, Consensus and EPS Surprise

 

PulteGroup, Inc. Price, Consensus and EPS Surprise | PulteGroup, Inc. Quote

PulteGroup primarily operates through two business segments — Homebuilding and Financial Services.

Revenues at the Homebuilding segment were up 24.6% year over year to $2.6 billion.

Home sale revenues of $2.57 billion rose 25.1% year over year on increased deliveries and average selling price. Land sale revenues totaled $25.5 million compared with $28.2 million a year ago.

The number of homes closed increased 17% year over year to 6,031. Notably, home closings were up across all operating regions of the company, namely Florida, Northeast, Southeast, Texas, Midwest and West. Average selling price (ASP) of homes delivered was $427,000, up 7% year over year.

The company’s backlog, which represents orders yet to be closed, was 11,164, up 3% year over year. Potential housing revenues from backlog increased 5% to $4.9 billion. Its backlog value was driven by a 2% increase in ASP of backlogs.

New home orders increased 1% year over year to 5,350 units in the quarter. Home orders were down in Southeast, Midwest and West, while orders were up in other operating regions. Value of new orders increased 1% year over year to $2.3 billion.

Margins

Home sale gross margin expanded 10 basis points (bps) year over year to 24%. Furthermore, operating margin increased 190 bps to 14.2%.

Homebuilding SG&A expenses, as a percentage of home sale revenues, were 9.8%, down 180 bps from the prior-year quarter.

Revenues from the Financial Services segment increased 9.9% year over year to $51.6 million. The segment generated pre-tax income of $20 million, up 10% year over year. Financial services benefited from higher mortgage origination volumes, owing to growth in the company’s homebuilding operations. Mortgage capture rate in the quarter was 75% compared with 80% in the year-ago quarter.

Financials

As of Sep 30, 2018, cash and cash equivalents were $728.6 million, up from $272.7 million at the end of 2017.

In the reported quarter, PulteGroup repurchased 2.4 million common shares for $67 million.

Currently, PulteGroup has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

M/I Homes, Inc. MHO is scheduled to release quarterly results on Oct 24. The Zacks Consensus Estimate for earnings is 94 cents, mirroring an increase of 32.4% year over year.

D.R. Horton, Inc. DHI is slated to report quarterly results on Nov 8. The Zacks Consensus Estimate for earnings is pegged at $1.25, reflecting an increase of 52.4% year over year.

Meritage Homes Corporation MTH is slated to report quarterly results on Oct 24. The Zacks Consensus Estimate for earnings is pegged at $1.37, reflecting an expected 34.3% year-over-year growth.

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