) first-quarter 2014 adjusted earnings of 19 cents per share
lagged the Zacks Consensus Estimate and the year-ago figure of 21
cents per share by 9.5%. We believe that the earnings miss was
due to a weak top line and higher-than-expected tax expenses.
PulteGroup reported total revenue of $1.12 billion in the
quarter, up 3.5% year over year. Total revenue however lagged the
Zacks Consensus Estimate of $1.22 billion by 8.2%.
Quarter in Detail
The company conducts its operations through two primary business
segments - Homebuilding and Financial Services. Pulte's
Homebuilding revenues declined 3.5% to $1.09 billion due to order
shortfall and lower number of homes delivered. Home sales
decreased 0.9% to $1.09 billion while land sales declined 77.1%
to $6.0 million in the quarter.
Home closings declined 10.4% year over year to 3,436 homes in the
reported quarter as the company witnessed weak home closing
numbers in all the regions excluding Northeast. However, average
selling prices (ASP) of homes delivered stood at $317,000, up
10.5% year over year, attributable to a change in mix toward
steeply-priced/higher margin move-up and active-adult homes.
The company's backlog, which represents orders yet to be closed,
stood at 7,199 homes, down 8% year over year. Potential housing
revenues from backlog remained flat year over year at $2.4
billion in the quarter.
Net Order Down Once Again
New home orders were down 6.0% year over year to 4,863 homes in
the quarter due to lower community count and higher home prices.
In fact, except Florida and Texas, all the regions witnessed a
decline in net new orders. We note that other homebuilders,
Meritage Homes Corp.
) also witnessed a decline in orders in the first quarter of
2014. The value of new orders increased 2.0% year over year to
$1.6 billion in the quarter due to higher absorption per
Pulte's community count declined 10% to 584 communities in the
first quarter of 2014. Pulte's net orders were weak due to a
decline in the number of communities as the company has been
intentionally slowing down sales in some markets due to the lack
of land development and scarcity of finished lots. The company is
focusing more on driving price and margin rather than pushing up
unit volumes, which, we believe, has been affecting net order
Adjusted gross margin increased 580 basis points (bps) year over
year and 60 bps sequentially to 23.8% of home sales. It was
driven by improved pricing and better mix of sales (particularly
of higher margin move-up homes and commonly managed plans).
However, selling, general and administrative expenses rose 150
bps to 13.3% of homebuilding revenues.
Revenues from the Financial Services segment declined 32.5% to
$24.9 million due to an extremely competitive landscape for
mortgage originations resulting from higher interest rates. The
segment recorded pre-tax income of $22 million in the quarter,
higher than prior-year earnings of $14 million.
Pulte had cash and cash equivalents and restricted cash of $1.3
billion as of Mar 31, 2014 compared with $1.7 billion as of Dec
During the quarter, Pulte repurchased 2.2 million of common
shares at a cost of $45 million. The company also redeemed $246
million of senior notes during the quarter.
PulteGroup carries a Zacks Rank #2 (Buy).
A better-ranked stock in the homebuilding sector that deserves a
William Lyon Homes
) with a Zacks Rank #1 (Strong Buy).
MERITAGE HOMES (MTH): Free Stock Analysis
NVR INC (NVR): Free Stock Analysis Report
PULTE GROUP ONC (PHM): Free Stock Analysis
WILLIAM LYON HM (WLH): Get Free Report
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