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PulteGroup (PHM) Q1 Home Sales Likely to be Tepid Amid Rate Woes
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PulteGroup, Inc.’s (PHM - Free Report) Homebuilding segment, which accounted for more than 98% of total revenues, is expected to showcase tepid growth year over year when PHM reports first-quarter 2024 results on Apr 23.
Despite challenges, PulteGroup showcased a robust performance over the past six months, witnessing a stock surge of 49.4%. This growth has outpaced the Zacks Building Products - Home Builders industry's increase of 42.2%. The company's strategic focus on entry-level buyers, liquidity management, and prudent cash flow and land investment strategies have been key drivers of its success.
Click here to know how the company’s overall first-quarter performance is expected to be.
Image Source: Zacks Investment Research
A Look at Q1 Segmental Performance
PulteGroup's Homebuilding segment is anticipated to have reflected the effects of rising mortgage rates compared with the previous year. However, the persistent scarcity of available existing homes in the market has been fueling the desire for new homes. This surge in demand is expected to have mitigated the headwind to some extent. Additionally, PulteGroup's judicious land investment approach and its emphasis on catering to entry-level buyers are projected to have worked in the company's favor during the first quarter.
Our model predicts Homebuilding revenues to rise 0.3% to $3.53 billion in the first quarter from $3.52 billion in the first quarter of 2023 but a decrease from $4.2 billion in the prior quarter. Within the Homebuilding umbrella, we expect home sales to be $3.5 billion, reflecting a 0.3% year-over-year rise but a decrease of 16% sequentially. Land sales are expected to rise 2% year over year to $30.7 million in the first quarter but decrease 11.2% sequentially.
PulteGroup expects home deliveries to be approximately 6,200-6,600 units compared with 6,394 homes delivered a year ago. Our model predicts deliveries to rise 1.3% year over year to 6,474 units. The increase reflects healthy demand conditions despite challenging mortgage rate scenarios.
PHM expects an average selling price or ASP for the quarter between $540,000 and $550,000 compared with the year-ago level of $545,000. Our model predicts the ASP of homes delivered to inch down 0.9% year over year to $540,400.
Also, the labor market tightened with the limited availability of labor, arresting the rapid growth in housing production. Labor shortages are leading to higher wages, thereby putting pressure on the margins.
From the margin perspective, the company expects home sale gross margins to contract in the range of 28%-28.5% for first-quarter 2024 from 29% reported in the year-ago period. Our model predicts homebuilding gross margins to be 28.2% for the quarter, down 80 basis points from the year-ago period.
PulteGroup anticipates SG&A (as a percentage of home sales revenues) of 10%, higher than 9.6% reported in the prior-year quarter.
Meanwhile, we expect the company’s new orders to increase 0.3% year over year and 18.7% sequentially to 7,378 units in the quarter. Backlog is expected to decline 0.6% year over year to 13,050 units.
Overall Q1 Earnings & Revenue Expectations
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $2.36 per share, indicating 0.4% growth from the year-ago figure of $2.35. Also, the consensus mark for revenues is $3.59 billion, suggesting a 0.3% year-over-year rise.
PHM: A Buy Ahead of Earnings?
Despite the challenges and modest growth expectations for first-quarter 2024, PulteGroup remains an attractive investment option. With a Zacks Rank #2 (Buy) and a track record of beating earnings estimates (surpassed earnings estimates in all the trailing four quarters, with the average surprise being 15.1%), the company demonstrates resilience and potential for growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Investors should consider the company's strong positioning in the market, strategic initiatives, and ability to navigate through industry challenges when making investment decisions. Over the past month, earnings projections for 2024 and 2025 have risen by 0.2% and 1.5%, respectively. This reflects analysts' growing optimism regarding the stock's potential for growth.
In conclusion, while short-term challenges may impact performance, PulteGroup's long-term prospects remain promising, making it a compelling investment opportunity ahead of the first-quarter earnings.
A Few Recent Construction Releases
D.R. Horton, Inc. (DHI - Free Report) reported second-quarter fiscal 2024 (ended Mar 31, 2024) results, with earnings and revenues surpassing Zacks Consensus Estimate.
DHI reported adjusted earnings of $3.52 per share for the fiscal second quarter, topping the Zacks Consensus Estimate of $3.08 by 14.3% and rallying 28.9% from the year-ago figure of $2.73. Total revenues (Homebuilding, Forestar, Rental and Financial Services) came in at $9.12 billion, up 14% year over year. The reported figure topped the consensus mark of $8.27 billion by 10.2%.
KB Home (KBH - Free Report) reported better-than-expected results in first-quarter fiscal 2024 (ended Feb 29, 2024). Both earnings and revenues beat the Zacks Consensus Estimate and rose on a year-over-year basis.
Looking forward to the second quarter and full-year 2024, KBH foresees enhanced conditions in the housing market and ongoing positive trends in the supply chain. 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 - Free Report) reported first-quarter fiscal 2024 results, wherein its earnings surpassed the Zacks Consensus Estimate but revenues missed the same. 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.
Image: Bigstock
PulteGroup (PHM) Q1 Home Sales Likely to be Tepid Amid Rate Woes
PulteGroup, Inc.’s (PHM - Free Report) Homebuilding segment, which accounted for more than 98% of total revenues, is expected to showcase tepid growth year over year when PHM reports first-quarter 2024 results on Apr 23.
Despite challenges, PulteGroup showcased a robust performance over the past six months, witnessing a stock surge of 49.4%. This growth has outpaced the Zacks Building Products - Home Builders industry's increase of 42.2%. The company's strategic focus on entry-level buyers, liquidity management, and prudent cash flow and land investment strategies have been key drivers of its success.
Click here to know how the company’s overall first-quarter performance is expected to be.
Image Source: Zacks Investment Research
A Look at Q1 Segmental Performance
PulteGroup's Homebuilding segment is anticipated to have reflected the effects of rising mortgage rates compared with the previous year. However, the persistent scarcity of available existing homes in the market has been fueling the desire for new homes. This surge in demand is expected to have mitigated the headwind to some extent. Additionally, PulteGroup's judicious land investment approach and its emphasis on catering to entry-level buyers are projected to have worked in the company's favor during the first quarter.
Our model predicts Homebuilding revenues to rise 0.3% to $3.53 billion in the first quarter from $3.52 billion in the first quarter of 2023 but a decrease from $4.2 billion in the prior quarter. Within the Homebuilding umbrella, we expect home sales to be $3.5 billion, reflecting a 0.3% year-over-year rise but a decrease of 16% sequentially. Land sales are expected to rise 2% year over year to $30.7 million in the first quarter but decrease 11.2% sequentially.
PulteGroup expects home deliveries to be approximately 6,200-6,600 units compared with 6,394 homes delivered a year ago. Our model predicts deliveries to rise 1.3% year over year to 6,474 units. The increase reflects healthy demand conditions despite challenging mortgage rate scenarios.
PHM expects an average selling price or ASP for the quarter between $540,000 and $550,000 compared with the year-ago level of $545,000. Our model predicts the ASP of homes delivered to inch down 0.9% year over year to $540,400.
Also, the labor market tightened with the limited availability of labor, arresting the rapid growth in housing production. Labor shortages are leading to higher wages, thereby putting pressure on the margins.
From the margin perspective, the company expects home sale gross margins to contract in the range of 28%-28.5% for first-quarter 2024 from 29% reported in the year-ago period. Our model predicts homebuilding gross margins to be 28.2% for the quarter, down 80 basis points from the year-ago period.
PulteGroup anticipates SG&A (as a percentage of home sales revenues) of 10%, higher than 9.6% reported in the prior-year quarter.
Meanwhile, we expect the company’s new orders to increase 0.3% year over year and 18.7% sequentially to 7,378 units in the quarter. Backlog is expected to decline 0.6% year over year to 13,050 units.
Overall Q1 Earnings & Revenue Expectations
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $2.36 per share, indicating 0.4% growth from the year-ago figure of $2.35. Also, the consensus mark for revenues is $3.59 billion, suggesting a 0.3% year-over-year rise.
PHM: A Buy Ahead of Earnings?
Despite the challenges and modest growth expectations for first-quarter 2024, PulteGroup remains an attractive investment option. With a Zacks Rank #2 (Buy) and a track record of beating earnings estimates (surpassed earnings estimates in all the trailing four quarters, with the average surprise being 15.1%), the company demonstrates resilience and potential for growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Investors should consider the company's strong positioning in the market, strategic initiatives, and ability to navigate through industry challenges when making investment decisions. Over the past month, earnings projections for 2024 and 2025 have risen by 0.2% and 1.5%, respectively. This reflects analysts' growing optimism regarding the stock's potential for growth.
In conclusion, while short-term challenges may impact performance, PulteGroup's long-term prospects remain promising, making it a compelling investment opportunity ahead of the first-quarter earnings.
A Few Recent Construction Releases
D.R. Horton, Inc. (DHI - Free Report) reported second-quarter fiscal 2024 (ended Mar 31, 2024) results, with earnings and revenues surpassing Zacks Consensus Estimate.
DHI reported adjusted earnings of $3.52 per share for the fiscal second quarter, topping the Zacks Consensus Estimate of $3.08 by 14.3% and rallying 28.9% from the year-ago figure of $2.73. Total revenues (Homebuilding, Forestar, Rental and Financial Services) came in at $9.12 billion, up 14% year over year. The reported figure topped the consensus mark of $8.27 billion by 10.2%.
KB Home (KBH - Free Report) reported better-than-expected results in first-quarter fiscal 2024 (ended Feb 29, 2024). Both earnings and revenues beat the Zacks Consensus Estimate and rose on a year-over-year basis.
Looking forward to the second quarter and full-year 2024, KBH foresees enhanced conditions in the housing market and ongoing positive trends in the supply chain. 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 - Free Report) reported first-quarter fiscal 2024 results, wherein its earnings surpassed the Zacks Consensus Estimate but revenues missed the same. 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.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.