PulteGroup (PHM) Q3 Earnings Beat, Revenues Lag, Orders Up
PulteGroup Inc. PHM reported mixed results in third-quarter 2023, wherein earnings surpassed the Zacks Consensus Estimates, but revenues missed the same. Both metrics increased year over year.
The company has been banking on a solid operating model, which strategically aligns the production of build-to-order and quick-move-in homes with applicable demand across consumer groups.
Backed by its disciplined and balanced business model, the company witnessed solid orders in the reported quarter and posted a 12-month return on equity of 30.1%.
Shares of this notable homebuilder fell 2.03% in the pre-market trading session on Oct 24.
Inside the Headlines
PHM reported adjusted earnings per share of $2.90, beating the consensus mark of $2.78 by 4.3% and increasing by 7.8% from $2.69 reported a year ago.
PulteGroup, Inc. Price, Consensus and EPS Surprise
PulteGroup, Inc. price-consensus-eps-surprise-chart | PulteGroup, Inc. Quote
Total revenues of $4.004 billion missed the consensus mark of $4.044 billion by 1% but increased 2.8% from the year-ago figure of $3.895 billion.
Segmental Discussion
PulteGroup primarily operates through two business segments — Homebuilding and Financial Services.
Revenues from the Homebuilding segment were up 2.7% year over year to $3.93 billion. Home sale revenues of $3.89 billion increased nearly 2.5% year over year, mainly due to the average price of homes closed. Land sale revenues rose 30.2% from a year ago to $39.9 million.
The number of homes closed increased slightly to 7,076 units from the year-ago level of 7,047 units. The average selling price of homes delivered was $549,000, up 2% year over year.
New home orders gained 43.5% year over year to 7,065 units for the quarter, benefiting from strong demand and an increased community count. The value of new orders also rose 36.2% from a year ago to $3.82 billion. The cancelation rate was 9% of the beginning backlog, down 350 basis points (bps) from the prior-year period.
Most importantly, its backlog, which represents orders yet to be closed, was 13,547 units, down 20.6% year over year. In addition, potential housing revenues from the backlog decreased by 23.2% from the prior-year quarter to $8.13 billion.
Home sales gross margin was down 100 bps year over year to 29.5% for the reported quarter. SG&A expenses (as a percentage of home sales revenues) improved 10 bps to 9.1% from 9.2% a year ago.
Revenues from the Financial Services segment increased 5.5% year over year to $76.7 million. Pretax income for the segment increased 5% to $29 million from a year ago.
Financials
At the end of the third quarter, cash, cash equivalents and restricted cash were $1.9 billion, up from $1.09 billion in 2022-end. Net debt-to-capital was 0.8% at the third quarter-end, significantly down from 9.6% at 2022-end.
Net cash provided by operating activities was $1.91 billion in the first nine months of 2023 versus net cash used in operating activities of $303.9 million in the prior year period.
In third-quarter 2023, the company repurchased 3.8 million common shares for $300 million at an average price of $79.84 per share.
Zacks Rank
PulteGroup currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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