On Mar 12, we maintained a Neutral recommendation on
), following appraisal of its fourth quarter results.
Why the Neutral Recommendation?
On Jan 31, 2012, this leading national homebuilder announced
fourth quarter 2012 earnings of $0.34 per share, which beat the
Zacks Consensus Estimate by 9.7% and were significantly better
than the prior-year quarter results. Improving housing
fundamentals combined with gross margin expansion and solid
overhead leverage led to the earnings beat. Pulte's total revenue
increased 24.6% year over year, owing to 23.4% revenue growth in
the homebuilding segment. Total revenue also beat the Zacks
Consensus Estimate of $1.46 billion.
The growth in Pulte's homebuilding revenues was driven by an
increase in new home orders and average selling prices as the
housing fundamentals improve steadily. In 2012, Pulte returned to
profitability as an enhanced housing market and the company's
restructuring initiatives resulted in year-over-year improvement
in net new orders, closings, revenues as well as gross
The Zacks Consensus Estimates for both 2013 and 2014 have seen
a mixed movement with estimates moving in both directions.
We believe that homebuilders like Pulte, which enjoy
significant land positions, broad geographic and product
diversity, and better capital positions, are expected take
maximum advantage of the housing recovery. Management believes
that 2013 will be a better year for the housing industry than
2012. We believe that Pulte's cost reduction and operating
efficiency improvement plans combined with further improvement in
housing demand will boost profitability in 2013.
However, the new home demand remains at historically low
levels due to the current weak U.S. economic conditions and tight
mortgage lending standards. Sustainable increases in housing and
housing demand for the long term will require the overall economy
to strengthen, including further job growth. Additionally, the
pending federal budget decisions could potentially disrupt the
housing recovery. Moreover, the housing recovery was uneven and
not broad based with some markets showing more upward momentum
than others. A sustainable housing recovery in the long term can
be achieved only through a broad-based improvement in the overall
economy, which we believe will take time.
Other Stocks to Consider
Pulte carries a Zacks Rank #3 (Hold). Some other housing
stocks worth considering include
) - Zacks Rank #1 (Strong Buy),
D.R. Horton Inc.
) -Zacks Rank #2 (Buy), and
Consorcio ARA, S. A. B. de C. V.
) - Zacks Rank #2 (Buy).
CONSORCIO ARA (CNRFF): Get Free Report
D R HORTON INC (DHI): Free Stock Analysis
NVR INC (NVR): Free Stock Analysis Report
PULTE GROUP ONC (PHM): Free Stock Analysis
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