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In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 7.7% and 4.4%, respectively. Earnings and revenues increased 43% and 16.8% on a year-over-year basis, respectively.
It is to be noted that PHM surpassed earnings estimates in 20 of the trailing 22 quarters.
Trend in Estimate Revision
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has remained unchanged at $2.58 per share over the past 60 days. Nonetheless, the estimated figure indicates a 50% increase from the year-ago earnings of $1.72 per share. Also, the consensus mark for revenues is $4.06 billion, suggesting 20.8% year-over-year growth.
Factors to Note
The U.S. housing market has been navigating through a challenging time comprising rising mortgage rates, continued supply-chain issues, material cost inflation and higher wage. Higher mortgage rates and higher home prices have been prompting for moderation in housing demand.
Nonetheless, PulteGroup has been reaping benefits from the successful execution of initiatives to boost profitability, with a focus on entry-level homes. The company’s earnings and revenues are expected to have increased in the second quarter, given a prudent land investment strategy, higher pricing and affordable product offerings.
However, unprecedented supply-chain challenges and labor shortages have been creating hurdles for builders to fulfill orders and deliveries, thereby impacting revenues to some extent.
PulteGroup expects closings of 7,200-7,600 homes for the second quarter, indicating a decline from 7,232 homes delivered a year ago. It expects a higher average selling price or ASP for the quarter in the range of $525,000-$535,000, suggesting an increase from $447,000 in the year-ago period.
Overall, the Zacks Consensus Estimate for Homebuilding revenues of $3.96 billion suggests an increase from $3.27 billion a year ago, courtesy of higher ASP.
From the margin perspective, input cost inflation and high costs associated with labor and transportation are expected to have weighed on margins to some extent. That said, higher pricing and prudent cost saving efforts are expected to have mitigated the risks. As such, given these cost price dynamics, the company expects homebuilding gross margins to expand to 29.5-30% for second-quarter 2022 from 26.6% reported in the year-ago period.
SG&A expenses (as a percentage of home sales revenues) for the quarter are expected in the 9.4-9.6% range. The figure was 9.8% a year ago.
Overall, higher prices, along with improved operating leverage, are expected to have benefited PulteGroup’s earnings and revenues in the second quarter amid continuous supply-chain woes.
Our proven model does not conclusively predict an earnings beat for PulteGroup for the quarter to be reported. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.
Earnings ESP: PHM has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: It currently carries a Zacks Rank #5 (Strong Sell).
Here are some companies in the Zacks Construction sector which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.
United Rentals, Inc. (URI - Free Report) has an Earnings ESP of +11.38% and carries a Zacks Rank #3.
URI’s earnings topped the consensus mark in two of the last four quarters but missed on the other two occasions, with the average surprise being 2.3%.
Meritage Homes Corporation (MTH - Free Report) has an Earnings ESP of +2.95% and holds a Zacks Rank #3.
MTH’s earnings topped the consensus mark in all of the last four quarters, with the average surprise being 16.8%.
KBR, Inc. (KBR - Free Report) has an Earnings ESP of +1.81% and a Zacks Rank #1.
KBR’s earnings topped the consensus mark in the last four quarters, with the average surprise being 12%.
Image: Bigstock
PulteGroup (PHM) to Report Q2 Earnings: What's in the Cards?
PulteGroup Inc. (PHM - Free Report) is scheduled to report second-quarter 2022 results on Jul 26, before the opening bell.
In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 7.7% and 4.4%, respectively. Earnings and revenues increased 43% and 16.8% on a year-over-year basis, respectively.
It is to be noted that PHM surpassed earnings estimates in 20 of the trailing 22 quarters.
Trend in Estimate Revision
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has remained unchanged at $2.58 per share over the past 60 days. Nonetheless, the estimated figure indicates a 50% increase from the year-ago earnings of $1.72 per share. Also, the consensus mark for revenues is $4.06 billion, suggesting 20.8% year-over-year growth.
Factors to Note
The U.S. housing market has been navigating through a challenging time comprising rising mortgage rates, continued supply-chain issues, material cost inflation and higher wage. Higher mortgage rates and higher home prices have been prompting for moderation in housing demand.
Nonetheless, PulteGroup has been reaping benefits from the successful execution of initiatives to boost profitability, with a focus on entry-level homes. The company’s earnings and revenues are expected to have increased in the second quarter, given a prudent land investment strategy, higher pricing and affordable product offerings.
However, unprecedented supply-chain challenges and labor shortages have been creating hurdles for builders to fulfill orders and deliveries, thereby impacting revenues to some extent.
PulteGroup expects closings of 7,200-7,600 homes for the second quarter, indicating a decline from 7,232 homes delivered a year ago. It expects a higher average selling price or ASP for the quarter in the range of $525,000-$535,000, suggesting an increase from $447,000 in the year-ago period.
Overall, the Zacks Consensus Estimate for Homebuilding revenues of $3.96 billion suggests an increase from $3.27 billion a year ago, courtesy of higher ASP.
From the margin perspective, input cost inflation and high costs associated with labor and transportation are expected to have weighed on margins to some extent. That said, higher pricing and prudent cost saving efforts are expected to have mitigated the risks. As such, given these cost price dynamics, the company expects homebuilding gross margins to expand to 29.5-30% for second-quarter 2022 from 26.6% reported in the year-ago period.
SG&A expenses (as a percentage of home sales revenues) for the quarter are expected in the 9.4-9.6% range. The figure was 9.8% a year ago.
Overall, higher prices, along with improved operating leverage, are expected to have benefited PulteGroup’s earnings and revenues in the second quarter amid continuous supply-chain woes.
PulteGroup, Inc. Price and EPS Surprise
PulteGroup, Inc. price-eps-surprise | PulteGroup, Inc. Quote
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for PulteGroup for the quarter to be reported. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.
Earnings ESP: PHM has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: It currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks With Favorable Combination
Here are some companies in the Zacks Construction sector which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.
United Rentals, Inc. (URI - Free Report) has an Earnings ESP of +11.38% and carries a Zacks Rank #3.
URI’s earnings topped the consensus mark in two of the last four quarters but missed on the other two occasions, with the average surprise being 2.3%.
Meritage Homes Corporation (MTH - Free Report) has an Earnings ESP of +2.95% and holds a Zacks Rank #3.
MTH’s earnings topped the consensus mark in all of the last four quarters, with the average surprise being 16.8%.
KBR, Inc. (KBR - Free Report) has an Earnings ESP of +1.81% and a Zacks Rank #1.
KBR’s earnings topped the consensus mark in the last four quarters, with the average surprise being 12%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.