) second quarter 2013 adjusted earnings (including charges from a
contractual dispute, debt repurchase and corporate relocation) of
26 cents per share lagged the Zacks Consensus Estimate of 29
cents by 10.3%.
Earnings were, however, significantly better than the
prior-year quarter earnings of 13 cents per share on the back of
a double-digit increase in top line and margin expansion.
PulteGroup reported total revenue of $1.28 billion in the
quarter, up 19.6% year over year, owing to double-digit revenue
growth in the homebuilding segment. Total revenue however lagged
the Zacks Consensus Estimate of $1.39 billion by 7.9%.
We believe that Pulte missed both the estimates due to declining
net order units and value in the quarter. The double-digit
decline in community count took its toll on net orders.
Quarter in Detail
The company conducts its operations through two primary business
segments - Homebuilding and Financial Services. Pulte's
Homebuilding revenues rose 20.4% to $1.24 billion, driven by
higher average selling prices and increased number of homes
Home sales increased 19.6% to $1.22 billion as the company
witnessed improved demand in almost every market. Land sales rose
131.8% to $20.4 million in the quarter.
New home orders were down 12.4% year over year to 4,885 homes in
the quarter due to 16% decline in the number of communities. Most
of the regions except Southeast and Florida witnessed decline in
net new order units. The value of new orders declined 5.6% year
over year to $1.52 billion in the quarter.
Net orders were weak as the company has been intentionally
slowing down sales due to lack of land development and
scarcity of finished lots. The company had also limited sales
pace across its communities in order to raise prices and drive
margins in most communities.
Home closings were up 8.8% year over year to 4,152 homes in the
reported quarter. The average selling price of homes delivered
stood at $294,000, up 9.7% year over year, attributable to a
change in mix toward steeply-priced Pulte-brand move-up homes and
improving housing market conditions resulting in better pricing.
The company's ending backlog, which represents orders yet to be
closed, was 8,558 homes, up 13.2% year over year. Potential
housing revenues from backlog rose 24.9% to $2.71 billion in the
Adjusted homebuilding gross margins expanded 360 basis points
(bps) from the prior-year quarter and 100 bps sequentially to
23.9% of home sales. It was driven by improved demand and pricing
and better mix of sales (particularly of move-up homes).
Revenues from the company's Financial Services segment went up
8.5% to $39.4 million, benefiting from increased home sales
volume. The segment recorded a pretax income of $16 million in
the quarter, flat year over year.
Pulte recently declared a quarterly cash dividend of 5 cents per
share, payable on Aug 12, to shareholders as of Aug 5, 2013. The
board of directors also increased the total share repurchase
authorization by $250 million to $352 million.
Pulte is optimistic about the growing momentum of the housing
market. They believe the housing demand will continue to grow
despite increase in interest rates and price appreciation.
Pulte currently carries a Zacks Rank #1 (Strong Buy).
Other stocks in the homebuilding sector that are performing well
and deserve a mention include
D. R. Horton Inc.
Ryland Group Inc.
MDC Holdings Inc.
). All the three homebuilding companies carry a Zacks Rank #1
D R HORTON INC (DHI): Free Stock Analysis
MDC HLDGS (MDC): Free Stock Analysis Report
PULTE GROUP ONC (PHM): Free Stock Analysis
RYLAND GRP INC (RYL): Free Stock Analysis
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