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PulteGroup (PHM) Shares Rise on Q3 Earnings & Revenue Beat

Zacks Equity Research
·4 min read

PulteGroup Inc.’s PHM shares gained 2.1% after the company reported third-quarter 2020 results, wherein earnings and revenues handily surpassed the Zacks Consensus Estimate, buoyed by higher demand. Ryan Marshall, president and chief executive officer of PulteGroup, pointed out, "The dramatic rebound in housing demand that began in May continued through the third quarter, as we generated exceptionally strong sales across all buyer groups and realized a 36% increase in net new orders over last year."

Inside the Headlines

Adjusted earnings per share came in at $1.34, beating the consensus mark of $1.11 by 20.7%. The bottom line also grew 32.7% year over year.

Total revenues of $2.95 billion surpassed the consensus mark by 8.2% and increased 9% from the year-ago figure of $2.71 billion.

PulteGroup, Inc. Price and EPS Surprise

PulteGroup, Inc. Price and EPS Surprise
PulteGroup, Inc. Price and EPS Surprise

PulteGroup, Inc. price-eps-surprise | PulteGroup, Inc. Quote

Segment Discussion

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

Revenues from the Homebuilding segment were up 7.7% year over year to $2.85 billion. Home sale revenues of $2.82 billion also improved 7.1% year over year, given higher deliveries and average price of homes closed. However, land sale revenues improved 182.7% from a year ago to $24.2 million.

The number of homes closed increased 4% year over year to 6,454. Home closings grew across most of the operating regions served (barring Southeast and Texas). Average selling price of homes delivered was $438,000, up 2.8% year over year due to the company’s shift in the product mix to include more first-time homebuyers.

Importantly, its backlog — which represents orders yet to be closed — was 14,962, up 29% year over year. In addition, potential housing revenues from backlog increased 32% from the prior-year quarter to $6.6 billion.

However, new home orders grew 36% year over year to 8,202 units for the quarter. Home orders were down across all operating regions served. Value of new orders improved 43% from a year ago to $3.6 billion.

Margins

Home sales gross margin was up 140 basis points (bps) year over year to 24.5% for the quarter. Furthermore, operating margin also expanded 210 bps to 14.9% as homebuilding SG&A expenses (as a percentage of home sales revenues) improved 70 bps year over year.

Revenues from the Financial Services segment improved 64.9% year over year to $106.9 million. The segment generated a pre-tax income of $64 million, up 98% from a year ago.

Financials

As of Sep 30, 2020, cash and cash equivalents were $2.1 billion, up from $1.22 billion at 2019-end. Debt-to-total capital ratio of 30.8% at third quarter-end was down from 33.6% at 2019-end.

Zacks Rank & Peer Releases

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

KB Home KBH — a Zacks Rank #3 (Hold) company — reported third-quarter fiscal 2020 (ended Aug 31, 2020) results, wherein both earnings and revenues topped the Zacks Consensus Estimate on solid housing gross margin.

Lennar Corporation LEN — currently carrying a Zacks Rank #1 — reported better-than-expected results for third-quarter fiscal 2020 (ended Aug 31, 2020). The quarterly results benefited from robust housing market fundamentals backed by low interest rates, and persistent undersupply of new as well as existing inventory. Also, solid execution of homebuilding and financial services businesses added to the positives.

NVR, Inc. NVR reported better-than-expected results for third-quarter 2020, wherein earnings and revenues topped the Zacks Consensus Estimate. The quarterly results benefited from solid housing market fundamentals in the United States, courtesy of low mortgage rates. It also sports a Zacks Rank #1.

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