Pulte Orders Remain Soft; Aggressive Capital Actions in Focus
On Dec 5, 2014, we issued an updated research report on PulteGroup Inc. (PHM).
On Oct 24, the national homebuilder reported mixed third-quarter 2014 results, beating the Zacks Consensus Estimate for earnings while meeting the same for revenues.
Pulte’s third-quarter earnings of 37 cents per share beat the Zacks Consensus Estimate of 36 cents by 2.8%. However, earnings declined 18% year over year due to softer orders and gross margins. Revenues of $1.59 were in line with the consensus mark and went up 0.6% year over year.
Homebuilding revenues rose 0.7% to $1.56 billion as home price increases made up for the order shortfall and lower number of homes delivered. Despite growing year over year, gross margin declined sequentially due to drag from lower margin closings from the August purchase of Dominion Homes.
New home orders remained flat year over year. However, excluding the Dominion acquisition, net orders declined 2% year over year. Pulte’s order trends have remained light for several quarters due to supply constraints in many markets, which in turn are hurting its community count.
However, concurrent with the third-quarter results, management announced a 60% increase in quarterly dividend to 8 cents per share and also raised the share repurchase authorization by $750 million. Moreover, management has authorized to spend $2.4 billion for land investment in 2015, which is $600 to $700 million over the expected land expenditures in 2014.
These shareholder-friendly capital actions coupled with Pulte’s large-scale business and geographic diversification and consistently improving profitability keeps our faith in the stock.
Key Picks from the Sector
Pulte currently carries a Zacks Rank #3 (Hold). Other stocks in the building and related sectors worth considering include Hovnanian Enterprises Inc. (HOV), CaesarStone Sdot-Yam Ltd. (CSTE) and NVR, Inc. (NVR). While Hovnanian and CaesarStone sport a Zacks Rank #1 (Strong Buy), NVR has a Zacks Rank #2 (Buy).
Read the Full Research Report on PHM
Read the Full Research Report on HOV
Read the Full Research Report on NVR
Read the Full Research Report on CSTE
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