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PulteGroup (PHM) Up 1.2% Since Last Earnings Report: Can It Continue?

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Zacks Equity Research
·4 min read
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A month has gone by since the last earnings report for PulteGroup (PHM). Shares have added about 1.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is PulteGroup due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

PulteGroup (PHM) Q4 Earnings & Revenue Beat Estimates

PulteGroup Inc. reported fourth-quarter 2020 results, wherein earnings and revenues handily surpassed the respective Zacks Consensus Estimate, buoyed by solid housing market momentum. Ryan Marshall, president and chief executive officer of PulteGroup, pointed out, "Our fourth quarter and full-year 2020 performance enable PulteGroup to enter 2021 with tremendous momentum supported by our outstanding operating metrics and a backlog of more than 15,000 homes.”

Inside the Headlines

Adjusted earnings per share came in at $1.49, beating the consensus mark of $1.38 by 8%. The bottom line also grew 30.7% year over year.

Total revenues of $3.19 billion surpassed the consensus mark of $3,076 million and increased 5.8% from the year-ago figure of $3.02 billion.

Segment Discussion

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

Revenues from the Homebuilding segment were up 4.7% year over year to $3.09 billion. Home sale revenues of $3.06 billion also improved 4.7% year over year, mainly due to higher average price of homes closed. Land sale revenues improved 9.8% from a year ago to $23.9 million.

The number of homes closed increased 1% year over year to 6,860. Home closings grew across most of the operating regions served (barring Southeast, Midwest and Texas). Average selling price of homes delivered was $446,000, up 4% year over year.

Importantly, its backlog — which represents orders yet to be closed — was 15,158, up 44% year over year. In addition, potential housing revenues from backlog increased 49.8% from the prior-year quarter to $6.8 billion.
However, new home orders grew 24% year over year to 7,056 units for the quarter. Home orders were up across all operating regions served. Value of new orders also improved 33% from a year ago to $3.3 billion.

Margins

Home sales gross margin was up 220 basis points (bps) year over year to 25% for the quarter. Furthermore, adjusted operating margin expanded 250 bps to 15.3% as adjusted homebuilding SG&A expenses (as a percentage of home sales revenues) improved 30 bps year over year.

Revenues from the Financial Services segment improved 51.8% year over year to $105.9 million. The segment generated a pre-tax income of $43 million, up 26.5% from a year ago.

Financials

As of Dec 31, 2020, cash and cash equivalents were $2.58 billion, up from $1.22 billion at 2019-end. Debt to total capital of 29.5% at 2020-end was down from 33.6% at 2019-end. In 2020, the company repurchased 4.5 million common shares, or approximately 2% of outstanding shares, for $171 million, or an average price of $37.58 per share.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, PulteGroup has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

PulteGroup has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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