) is set to report second-quarter 2014 results on Jul 24, before
the market opens. Last quarter, it had delivered a negative
earnings surprise of (9.52%).
Let's see how things are shaping up for this announcement.
Factors to Consider This Quarter
Pulte's order trends have remained weak for several quarters versus
competitors due to lower community count. Pulte is facing supply
constraints in many markets, which in turn, has lowered its
community count. This weak order trend is expected to continue in
the upcoming quarter.
The company has intentionally slowed down sales pace across some of
its communities due to lack of land development and scarcity of
finished lots. Shortage of buildable lots, skilled labor and
capital for smaller builders are limiting the production of homes,
thereby lowering inventory of both new and existing homes. Instead,
the company is focusing more on driving price and margin in most
communities. Though this strategy has been hurting net order
growth, it has been resulting in consistent margin expansion for
the past 13 quarters.
In the past quarters, gross margin expansion has been driven by
improved pricing, shift in mix towards move up homes and reduction
in construction cost. Margins also benefited from a decline in
discounts. Pulte expects margins to continue to expand in the
coming quarters benefiting from lower interest expenses, improved
pricing, shift toward move up buyers and increasing land values,
partially offset by increased land and construction cost in 2014.
Our proven model does not conclusively show that PulteGroup is
likely to beat earnings this quarter. That is because a stock needs
to have both a positive
and a Zacks Rank #1 (Strong Buy), 2 or 3 for this to happen. That
is not the case here, as you will see below.
The Earnings ESP is 0.00%.
PulteGroup's Zacks Rank #3 (Hold) when combined with a 0.00% ESP
makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Other stocks in the building/ construction sector that have both a
positive Earnings ESP and a favorable Zacks Rank are:
Martin Marietta Materials Inc.
), with an Earnings ESP of +2.44% and a Zacks Rank #2 (Buy).
United Rentals, Inc.
), with an Earnings ESP of +2.38% and a Zacks Rank #2.
), with an Earnings ESP of +1.28% and a Zacks Rank #2.
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PULTE GROUP ONC (PHM): Free Stock Analysis
MARTIN MRT-MATL (MLM): Free Stock Analysis
CURTISS WRIGHT (CW): Free Stock Analysis Report
UTD RENTALS INC (URI): Free Stock Analysis
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