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PulteGroup (PHM) Q3 Earnings Beat Estimates on Solid Demand

PulteGroup Inc .'s PHM third-quarter 2017 benefited from higher demand, despite disruptions caused by hurricanes Harvey and Irma, thanks to positive U.S. housing market dynamics accompanied by an improving economy and job market. Also, historically low interest rates and growing demand among first-time buyers bode well.

The company's third-quarter 2017 adjusted earnings of 60 cents per share beat the Zacks Consensus Estimate of 59 cents by 1.7%. Also, quarterly earnings reflected a solid 40% jump from the year-ago quarter's adjusted figure of 43 cents.

Earnings in the quarter under review were adjusted for $5 million, related to the resolution of certain insurance matters.

PulteGroup's total revenues of $2.13 billion missed the Zacks Consensus Estimate of $2.31 billion. Revenues, however, increased 9.6% year over year, owing to a rise in the number of homes delivered.

PulteGroup, Inc. Price, Consensus and EPS Surprise

PulteGroup, Inc. Price, Consensus and EPS Surprise | PulteGroup, Inc. Quote

Segment Details

The company primarily operates through two business segments - Homebuilding and Financial Services.

Homebuilding revenues increased 9.9% year over year to $2.08 billion.

Home sale revenues of $2.06 billion escalated 9.3% year over year on increased home closings and average selling price. Land sale revenues of $27.3 million increased from $13.2 million a year ago.

The number of homes closed increased 2.3% year over year to 5,151. Home closings increased across all operating regions of the company -- Florida, Midwest, Northeast and Southeast -- barring Texas and West. Average selling price (ASP) of homes delivered was $399,000, reflecting an increase of 6.7% year over year.

The company's backlog, which represents orders yet to be closed, was 10,823, increasing 14.9% year over year. Potential housing revenues from backlog increased 26% to $4.7 billion. Backlog value was driven by a 10% increase in average sales price of backlogs, marking a 10-year high for the company.

New home orders increased 11% year over year to 5,300 in the quarter. Home orders increased across all operating regions, baring Northeast. Value of new orders increased 23% year over year to $2.3 billion.

Margins

Home sales' gross margin decreased 80 basis points year over year to 23.9% but up 50 bps sequentially.

SG&A expenses, as percentage of home sale revenues, were 11.6%, down 170 bps from the prior-year quarter.

Revenues from the Financial Services segment decreased 2.2% year over year to $47 million. The segment generated pre-tax income of $18 million, lower than $21 million in the prior-year quarter, due to more competitive operating environment which impacted pricing during the period. Mortgage capture rate in the quarter was 80%, compared with 81% in the prior-year quarter.

Financials

As of Sep 30, 2017, cash and cash equivalents were $158.2 million, down from $698.9 million at the end of 2016.

During the quarter, PulteGroup repurchased 10.4 million common shares for $260 million, at an average price of $25.11 per share.

Zacks Rank

PulteGroup carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Peer Releases

NVR, Inc. NVR reported third-quarter 2017 earnings of $38.02 per share, surpassing the Zacks Consensus Estimate of $36.11 by 5.3%. The reported figure also increased 34% from $28.46 in the year-ago quarter.

Masco Corporation MAS reported third-quarter 2017 earnings of 50 cents per share, missing the Zacks Consensus Estimate of 53 cents by 5.7%.

Upcoming Release in the Construction Sector

D.R. Horton, Inc. DHI is scheduled to release its quarterly numbers on Nov 9. The Zacks Consensus Estimate for earnings is pegged at 82 cents, reflecting an increase of 9.6% on a year-over-year basis.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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