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PulteGroup's (PHM) Q2 Earnings & Revenues Beat, Margins Dip

Zacks Equity Research

PulteGroup Inc.’s PHM second-quarter 2019 earnings and revenues surpassed the respective Zacks Consensus Estimate. The company remains confident about upbeat housing demand for the remainder of 2019, given recent declines in mortgage rates, and improving economic, employment and demographic trends.

Inside the Headlines

Earnings per share came in at 86 cents, beating the consensus mark of 82 cents by 4.9%. The bottom line, however, decreased 3.4% from the year-ago level.

Total revenues of $2.49 billion outpaced the consensus mark of $2.48 billion by 0.5% but decreased 3.4% from the year-ago figure of $2.57 billion.

PulteGroup, Inc. Price, Consensus and EPS Surprise

PulteGroup, Inc. Price, Consensus and EPS Surprise

PulteGroup, Inc. price-consensus-eps-surprise-chart | PulteGroup, Inc. Quote

Segment Discussion

PulteGroup primarily operates through two business segments — Homebuilding and Financial Services.

Revenues from the Homebuilding segment were down 3.3% year over year to $2.43 billion.

Moreover, home sale revenues of $2.4 billion declined 1.9% year over year as higher average selling price or ASP was offset by lower deliveries. Land sale revenues dropped 56% to $29.5 million from $66.9 million a year ago.

The number of homes closed also dropped 3% year over year to 5,589. Notably, home closings remained subdued across most of the operating regions served (barring Florida and Texas), namely Northeast, Southeast, Midwest and West. ASP of homes delivered was $430,000, up 1% year over year.

Importantly, the company’s backlog — which represents orders yet to be closed — was 11,793, down 0.4% year over year. In addition, potential housing revenues from backlog decreased 1.8% from the prior-year quarter to $5.11 billion.

New home orders increased 7% year over year to 6,792 units in the quarter. Home orders were up across all operating regions served, barring Midwest. Value of new orders grew 7% from a year ago to $2.9 billion.

Margins

Home sale gross margin was down 90 basis points (bps) year over year to 23.1% in the quarter. Furthermore, adjusted operating margin contracted 90 bps to 12.3%.

Adjusted homebuilding SG&A expenses — as a percentage of home sale revenues — were 10.8%, flat with the prior-year quarter.

Revenues from the Financial Services segment improved 6.1% year over year to $56 million. The segment generated pre-tax income of $25.1 million, up from $20.7 million a year ago. Mortgage capture rate in the quarter was 81%, up from 76% in the year-ago period.

Financials

As of Jun 30, 2019, cash and cash equivalents were $631.3 million, down from $1.11 billion at the end of 2018.

In the reported quarter, PulteGroup repurchased 2.6 million shares for $83 million.

Currently, the company has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Peer Releases

NVR, Inc. NVR reported second-quarter 2019 results, wherein earnings surpassed the Zacks Consensus Estimate. Also, the reported figure increased 8.2% from the prior-year quarter. Total revenues (Homebuilding & Mortgage Banking fees combined) were $1.8 billion in the quarter, up 1% year over year on higher deliveries and prices.

Lennar Corporation LEN reported better-than-expected results in second-quarter fiscal 2019 (ended May 31, 2019), after missing estimates in the preceding quarter. Earnings and revenues increased on a year-over-year basis during the quarter.

KB Home’s KBH earnings and revenues beat expectations in second-quarter fiscal 2019. However, earnings and revenues decreased 10.5% and 7.2% year over year, respectively, in the quarter.

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