Australia markets open in 48 minutes

PulteGroup (PHM) Q1 Earnings Beat Estimates, Revenues Miss

Zacks Equity Research

PulteGroup Inc.’s PHM shares gained 1.8% after the company reported first-quarter 2020 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same. Higher demand owing to favorable housing dynamics in most part of the quarter, backed by lower interest rates and improved affordability, had a positive impact on PulteGroup’s performance.

Inside the Headlines

Earnings per share came in at 74 cents, beating the consensus mark of 70 cents by 5.7%. The bottom line also grew 25.4% year over year.

Total revenues of $2.29 billion lagged the consensus mark of $2.33 billion by 1.6% but increased 14.9% from the year-ago figure of $1.99 billion.

PulteGroup, Inc. Price, Consensus and EPS Surprise

PulteGroup, Inc. Price, Consensus and EPS Surprise

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

Segment Discussion

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

Revenues from the Homebuilding segment were up 14.7% year over year to $2.24 billion.

Home sale revenues of $2.22 billion also improved 13.9% year over year, given higher deliveries. Also, land sale revenues grew 536% to $18.9 million from $2.9 million a year ago.

The number of homes closed increased 16% year over year to 5,373. Home closings grew across most of the operating regions served (barring Midwest). Average selling price of homes delivered was $413,000, down 2% year over year due to changes in the product and geographic mix of homes closed in the quarter.

Importantly, the company’s backlog — which represents orders yet to be closed — was 12,629, up 19.7% year over year. In addition, potential housing revenues from backlog increased 20.8% from the prior-year quarter to $5.58 billion.

New home orders also increased 16% year over year to 7,495 units in the quarter. Home orders were up across all operating regions served (except Midwest), given increased community count and higher absorption pace. Value of new orders also grew 19% from a year ago to $3.3 billion.

Margins

Home sales gross margin was up 30 basis points (bps) year over year to 23.7% in the quarter. Furthermore, adjusted operating margin also expanded 130 bps to 11.8%.

Homebuilding SG&A expenses — as a percentage of home sale revenues — were 11.9%, down 110 bps from the prior-year quarter.

Revenues from the Financial Services segment improved 24.4% year over year to $54.6 million. The segment generated pre-tax income of $20 million, up from $12 million a year ago. Mortgage capture rate in the quarter was 87%, reflecting an increase from 80% in the year-ago period.

Financials

As of Mar 31, 2020, cash and cash equivalents were $1.82 billion, up from $1.22 billion at the end of 2019. During the quarter, it repurchased 2.8 million common shares for $96 million, or an average price of $33.86 per share. However, given the economic uncertainties, it has opted to suspend all stock repurchase activities.

2020 Guidance Revoked

Given the uncertainties arising from the coronavirus outbreak, PulteGroup revoked its guidance for 2020. The company also intends to suspend providing guidance for the foreseeable future.

It experienced material slowdown in consumer traffic and sales activity beginning in mid-March, as the state and local government authorities implemented various restrictions and stay-in-place orders to restrict the virus spread.

Nonetheless, the company acknowledged the fact the U.S. housing industry started 2020 on a solid note and the momentum continued until the devastating effects of the COVID-19 pandemic began impacting the country.

Recent Peer Releases

KB Home KBH reported impressive results in first-quarter fiscal 2020 (ended Feb 29, 2020). Earnings and revenues topped the respective Zacks Consensus Estimate, and registered notable improvement on a year-over-year basis.

Lennar Corporation LEN reported solid results in first-quarter fiscal 2020 (ended Feb 29, 2020). This marks the company’s fourth consecutive quarter of an earnings beat. The results mainly benefited from solid demand for new homes, depicting healthy housing market fundamentals.

Zacks Rank

PulteGroup — which shares space with D.R. Horton, Inc. DHI in the Zacks Building Products - Home Builders industry — currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Biggest Tech Breakthrough in a Generation

Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.

A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.

See 8 breakthrough stocks now>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
PulteGroup, Inc. (PHM) : Free Stock Analysis Report
 
KB Home (KBH) : Free Stock Analysis Report
 
Lennar Corporation (LEN) : Free Stock Analysis Report
 
D.R. Horton, Inc. (DHI) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research