PulteGroup (PHM) Misses on Q3 Earnings & Revenues, Stock Up
PulteGroup Inc. PHM reported unimpressive results in third-quarter 2022. Quarterly earnings and revenues missed their respective Zacks Consensus Estimate thanks to prevailing industry headwinds.
Nonetheless, the metrics increased on a year-over-year basis. Shares of this notable homebuilder jumped 0.87% in the pre-market trading session, post release.
Ryan Marshall, PulteGroup’s president and CEO, stated, “While we reported significant growth in our third quarter earnings, demand clearly slowed in the period as dramatically higher interest rates created financial and psychological hurdles for potential homebuyers,” said Marshall. “In response to today’s more challenging market conditions, we continue to adjust our sales, construction and investment practices as we work to turn inventory and balance our housing starts to appropriately match the pace of sales.”
Inside the Headlines
Earnings per share came in at $2.69, missing the consensus mark of $2.73 by 1.5% but increasing 47.8% from $1.82 per share a year ago. The upside was driven by gains in revenues, improved gross margin and overhead leverage.
PulteGroup, Inc. Price, Consensus and EPS Surprise
PulteGroup, Inc. price-consensus-eps-surprise-chart | PulteGroup, Inc. Quote
Total revenues of $3.94 billion also missed the consensus mark of $4.04 billion by 2.5% but increased 13.4% from the year-ago figure of $3.48 billion.
Segment Discussion
PulteGroup primarily operates through two business segments — Homebuilding and Financial Services.
Revenues from the Homebuilding segment were up 14.3% year over year to $3.87 billion. Home sale revenues of $3.84 billion increased 16% year over year, mainly due to the higher average price of homes closed. Land sale revenues declined 51.4% from a year ago to $30.7 million.
The number of homes closed increased 1% from the year-ago level to 7,047 units. The average selling price of homes delivered was $545,000, up 15% year over year.
Importantly, its backlog, which represents orders yet to be closed, was 17,053 units, down 14% year over year. In addition, potential housing revenues from backlog increased 3% from the prior-year quarter to $10.58 billion.
However, new home orders dropped 28% year over year to 4,924 units for the quarter, owing to several headwinds like rising mortgage rates, lower affordability, lower consumer confidence and slowed demand. This resulted in a cancelation rate of 24%, up from 10% in the prior year period and 15% in the second quarter of 2022. Home orders were down across all operating regions served. The value of new orders also slipped 8.3% from a year ago to $2.81 billion.
Margins
Home sales gross margin was up 360 bps year over year to 30.1% for the quarter. Adjusted operating margin grew 410 bps year over year to 21%. Adjusted SG&A expenses (as a percentage of home sales revenues) improved to 9.1% from 9.6% a year ago.
Revenues from the Financial Services segment declined 20.5% year over year to $72.7 million. Pretax income for the segment decreased to $27.5 million from $48.6 million a year ago. The decline was due to a reduction in loan volumes owing to a fall in capture rate to 77% compared with 85% last year and the more competitive pricing environment.
Financials
At September-end, cash and cash equivalents (including restricted cash) were $291.4 million, down from $1.83 billion in 2021 end. Debt to total capital of 22.5% at third-quarter end was down from 21.3% at 2021 end.
In the third quarter, the company repurchased 4.4 million common shares for $180 million at an average price of $41.20 per share.
Zacks Rank & Recent Construction Releases
PulteGroup currently has a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
RPM International Inc. RPM reported impressive results in first-quarter fiscal 2023 (ended Aug 31, 2022), with earnings and sales surpassing their respective Zacks Consensus Estimate and increasing on a year-over-year basis.
The upside was driven by the continued implementation of MAP operational improvement initiatives, double-digit sales growth across the segments and strong pricing offset supply chain woes, cost inflation, macroeconomic challenges and foreign exchange headwinds.
Acuity Brands, Inc. AYI reported solid fourth-quarter fiscal 2022 results. The top and the bottom line surpassed the Zacks Consensus Estimate and increased on a year-over-year basis.
The upside was backed by strong demand across the end markets along with price increases and product and productivity improvement.
Watsco, Inc. WSO reported third-quarter 2022 results, wherein the company’s earnings missed the Zacks Consensus Estimate, but sales beat the same.
Nonetheless, WSO achieved higher sales and profitability, reflecting normalized residential HVAC equipment volumes, effective price realization, a continued shift toward higher-efficiency HVAC equipment and expansion in sales of other higher-margin HVAC products.
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