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Why PulteGroup’s sales were roughly flat year-over-year

Brent Nyitray, CFA, MBA

Why PulteGroup expressed optimism with its 1Q 2014 earnings (Part 2 of 5)

(Continued from Part 1)

PulteGroup reports flat revenues

PulteGroup (PHM) reported fourth-quarter revenues of $1.12 billion, which narrowly missed the Street estimate of $1.18 billion. Sales were down 32% on a sequential basis and flat on a year-over-year basis. The homebulding business is highly seasonal, so the sequential drop was completely expected. The increase in revenues was driven by a 10% increase in average selling prices, which offset a 10% drop in closings. The increase in average selling prices reflects both price increases and a product mix more skewed towards the move-up buyer.


Orders declined 6% on a unit basis, to 4,863 net new orders from 5,173 the year before. The dollar value of new orders increased 2%, to $1.6 billion. As of the end of the year, the backlog was 7,199 homes, valued at $2.4 billion, compared to a prior-year backlog of 7,825 homes valued at more or less the same dollar amount. The average selling price of their backlog increased to $317,000.

Why Pulte is optimistic about the spring selling season

Pulte made some of the same observations that D.R. Horton (DHI) made—the spring selling season has begun a bit earlier than usual. As a general rule, the spring selling season begins around Super Bowl Sunday. Poor weather in the Northeast and the Midwest undoubtedly depressed traffic a bit, but Pulte noted that traffic seemed to be accelerating late in the quarter. So far, Lennar (LEN) and KB Home (KBH) have reported good numbers. Only NVR (NVR) missed.

Expansion plans for the future

PulteGroup noted strength in the active adult segment and plans to devote more resources to that segment. Plus, the company increased its planned land acquisitions to $2 billion for 2014. While first-time homebuyers tend to be an important segment for PulteGroup, they remain underrepresented for the time being, and therefore Pulte is focusing more on other segments—particularly the move-up buyer and the active adult buyer. Finally, Pulte noted a geographic shift. California and the West Coast in general seem to be cooling, while the Midwest and the Northeast are picking up.

Continue to Part 3

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