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PulteGroup Boosts Community Count With Parallel and Icon

Zacks Equity Research

PulteGroup, Inc. PHM, through Pulte Homes, announced the opening of two neighborhoods — Parallel and Icon. The neighborhoods are located at Grace Park, the builder’s latest for-sale residential development in Inglewood, CA.

Pulte Homes, which mainly caters the move-up buyer segment, will offer two- and three-story floor plans with a range of 1,564-2,572 square feet size. Parallel consists of 45 low-maintenance detached townhomes, while Icon at Grace Park is a new collection of 60 single-family auto court-style homes. With price starting around $800, Grace Park community will support Smart Home technology options.

PulteGroup has been experiencing higher demand courtesy of lower interest rates and improved affordability conditions. Moreover, the company has been investing in new communities, as reflected in the 4% increase in active community count to 865 in third-quarter 2019. It has also witnessed higher absorption pace of 9% in the quarter, driven by a 22% increase from first-time communities and an 8% increase from move-up communities. Orders also rose 13% year over year, courtesy of higher demand.

Meanwhile, shares of PulteGroup, a Zacks Rank #1 (Strong Buy) company, have outperformed the industry  year to date. Its shares have surged 46.9% compared with the industry’s rise of 44.6% in the said period. The price performance is backed by an impressive earnings surprise history. The company surpassed the Zacks Consensus Estimate for 10 straight quarters. Impressive earnings performance along with favorable demand trends in the PulteGroup- served markets is expected to improve the stock’s performance in the near future.

However, factors like rising labor, land and material costs are hurdles for homebuilders like PulteGroup and others. In fact, the company now expects gross margin for the fourth quarter in the range of 23.2-23.4% that indicates a decline from 23.8% in the year-ago quarter.

Other Key Picks

Other top-ranked stocks in the same space include Toll Brothers, Inc TOL, Meritage Homes Corporation MTH, and KB Home KBH, all sporting a Zacks Rank #1.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Toll Brothers surpassed estimates in all of the trailing four quarters, the average being 17.5%.

Meritage Homes has three-five year expected earnings per share growth rate of 8.5%.

KB Home’s current year earnings are expected to rise 67.3%.

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