PulteGroup Inc. PHM reported stellar results in second-quarter 2024, wherein earnings and revenues handily beat the Zacks Consensus Estimate.
In the second quarter of 2024, PulteGroup saw significant benefits from key factors driving its success. The company's balanced operating model resulted in increases in closings, average sales price, and gross margin, which collectively led to a 19.3% increase in earnings per share (EPS). Strong cash flows provided the flexibility to invest in business growth, return funds to shareholders, and strengthen the overall capital structure.
Despite short-term impacts from interest rate movements, long-term market dynamics, driven by a structural shortage of homes from years of underbuilding, continued to favor PulteGroup. Effective management of sales price, pace, and starts on a community-by-community basis enabled the company to achieve high returns on invested capital and equity, evidenced by a 27.1% return on equity over the past 12 months.
Shares of this notable homebuilder gained 2.6% following the earnings release on Jul 23.
PulteGroup, Inc. Price, Consensus and EPS Surprise
PulteGroup, Inc. price-consensus-eps-surprise-chart | PulteGroup, Inc. Quote
Inside the Headlines
PHM reported adjusted EPS of $3.58, which topped the consensus mark of $3.21 by 11.5% and increased 19.3% from $3.00 reported a year ago. The current quarter's adjusted EPS excludes a $52 million pre-tax insurance benefit, equating to 19 cents per share, and a $13 million benefit, or 6 cents per share, from the favorable resolution of certain state tax matters. The prior-year quarter excludes a $65 million pre-tax insurance benefit, amounting to 21 cents per share.
Total revenues of $4.6 billion beat the consensus mark of $4.48 billion by 2.7% and increased 9.8% from the year-ago figure of $4.19 billion.
Segment Discussion
PulteGroup primarily operates through two business segments — Homebuilding and Financial Services.
Revenues from the Homebuilding segment were up 9.6% year over year to $4.49 billion. Home sale revenues of $4.45 billion increased 9.6% year over year, mainly due to the solid homes closed and higher pricing. Land sale revenues rose 5.9% from a year ago to $39.8 million.
The number of homes closed increased 8% to 8,097 units from the year-ago level. The average selling price of homes delivered was $549,000, up 2% year over year.
New home orders declined 3.7% year over year to 7,649 units for the quarter. Yet, the value of new orders also rose 2% from a year ago to $4.4 billion.
PHM’s backlog, which represents orders yet to be closed, was 12,982 units, down 4.2% year over year. In addition, potential housing revenues from the backlog were down 1% from the prior-year quarter to $8.11 billion.
Home sales gross margin was up 30 bps year over year to 29.9% in the reported quarter, backed by ongoing strength in homebuyer demand and a favorable geographic mix of homes closed. SG&A expenses (as a percentage of home sales revenues) increased 30 bps to 8.1% from 7.8% a year ago.
Revenues from the Financial Services segment increased 21.1% year over year to $111.7 million. Pretax income for the segment increased to $63 million from the year-ago figure of $46 million.
Financials
At the end of the second quarter, cash, cash equivalents and restricted cash were $1.45 billion, down from $1.85 billion at the end of 2023. Net debt-to-capital was 1.8% at the second-quarter end, up from 1.1% at 2023-end.
Net cash provided by operating activities was $657.3 million in the first half of 2024 compared with $1.45 billion in the prior-year period.
In the reported quarter, the company repurchased 2.8 million common shares for $314 million at an average price of $113.79 per share.
Zacks Rank
PulteGroup currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Peer Releases
D.R. Horton, Inc. DHI reported third-quarter fiscal 2024 (ended Jun 30, 2024) results, with earnings and revenues surpassing Zacks Consensus Estimate. On a year-over-year basis, both the top and bottom lines increased.
DHI now expects consolidated revenues in the range of $36.8-$37.2 billion versus the prior expectation of $36.7-$37.7 billion. DHI reported $35.5 billion in revenues in fiscal 2023. Homes closed are anticipated within 90,000-90,500 units versus 89,000-91,000 units expected earlier.
KB Home KBH reported impressive results in the second quarter of fiscal 2024 (ended May 31, 2024). Both earnings and revenues beat the Zacks Consensus Estimate. Shares of this leading homebuilder rose 2.2% in the after-market trading session on Jun 18.
On an encouraging note, KB Home’s earnings increased on a year-over-year basis despite a revenue decline. Leveraging the advantages of its Built to Order model, which provides buyers with choices, flexibility and affordability, the company is confident in its ability to effectively navigate potential fluctuations in housing market conditions.
Lennar Corporation LEN reported second-quarter fiscal 2024 results, wherein its earnings and revenues surpassed the Zacks Consensus Estimate. On a year-over-year basis, both the top and bottom lines increased, given the company’s emphasis on maintaining a steady production rate to drive sales momentum.
Lennar strategically utilized pricing, incentives, marketing expenditure and dynamic pricing insights to ensure steady sales volume despite fluctuations in interest rates.
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