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PulteGroup (PHM) Q2 Home Sales to Grow Despite Rate Woes
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PulteGroup, Inc.’s (PHM - Free Report) Homebuilding segment, which accounted for more than 98% of total revenues in 2023, is expected to have increased year over year when PHM reports second-quarter 2024 results on Jul 23.
Despite challenges, PulteGroup showcased a robust performance so far this year, witnessing a stock surge of 20.9%. This growth has outpaced the Zacks Building Products - Home Builders industry's increase of 16.2%. The company's strategic focus on entry-level buyers, liquidity management, resilient operating model, and prudent cash flow and land investment strategies have been key drivers of its success.
Click here to know how the company’s overall second-quarter performance is expected to be.
Image Source: Zacks Investment Research
A Look at Q2 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. Additionally, PulteGroup's judicious land investment approach and its emphasis on catering to entry-level buyers, along with prudent marketing strategies (like a mortgage buydown program), are expected to have worked in the company's favor during the second quarter.
Our model predicts Homebuilding revenues to rise 6.7% to $4.37 billion in the second quarter from $4.09 billion in the second quarter of 2023 and an increase from $3.86 billion in the prior quarter. Within the Homebuilding umbrella, we expect home sales to be $4.34 billion, reflecting a 6.8% year-over-year rise and 13.5% sequentially. Land sales are expected to decline 4.7% year over year to $35.8 million and 3.7% sequentially in the second quarter.
PulteGroup expects home deliveries to be approximately 7,800-8,200 units compared with 7,518 homes delivered a year ago. Our model predicts deliveries to grow 6.3% year over year to 7,992 units.
PHM expects a higher average selling price or ASP for the quarter between $540,000 and $550,000 compared with the year-ago level of $540,000. Our model predicts the ASP of homes delivered to inch up 0.5% year over year to $542,500.
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 to 29.2% in the reported quarter from the year-ago period. Our model predicts homebuilding gross margins to be 29.2% for the quarter, down 30 basis points from the year-ago period.
We expect SG&A (as a percentage of home sales revenues) to be 10%, higher than 7.8% reported in the prior-year quarter.
Meanwhile, we expect the company’s new orders to increase 7% year over year and 1.5% sequentially to 8,501 units in the quarter. Backlog is expected to grow 2.8% year over year to 13,938 units.
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $3.20 per share, indicating 6.7% growth from the year-ago figure of $3.00. Also, the consensus mark for this Zacks Rank #3 (Hold) company’s revenues is $4.48 billion, indicating a 6.9% year-over-year rise.
Stocks With Favorable Combinations
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 on their respective quarters to be reported.
MTH’s earnings topped the consensus mark in all the last four quarters, with the average being 27%. Earnings for the to-be-reported quarter are expected to grow 3% year over year.
Dycom Industries (DY - Free Report) has an Earnings ESP of +4.43% and carries a Zacks Rank #2 (Buy).
DY’s earnings beat the consensus mark in three of the last four quarters and missed on one occasion, the average surprise being 30.2%. Earnings for the to-be-reported quarter are expected to grow 7.4% year over year.
Comfort Systems USA (FIX - Free Report) has an Earnings ESP of +2.25% and carries a Zacks Rank #2.
FIX’s earnings surpassed the consensus mark in all of the last four quarters, the average surprise being 20%. Earnings for the to-be-reported quarter are expected to increase 61.1% year over year.
Image: Bigstock
PulteGroup (PHM) Q2 Home Sales to Grow Despite Rate Woes
PulteGroup, Inc.’s (PHM - Free Report) Homebuilding segment, which accounted for more than 98% of total revenues in 2023, is expected to have increased year over year when PHM reports second-quarter 2024 results on Jul 23.
Despite challenges, PulteGroup showcased a robust performance so far this year, witnessing a stock surge of 20.9%. This growth has outpaced the Zacks Building Products - Home Builders industry's increase of 16.2%. The company's strategic focus on entry-level buyers, liquidity management, resilient operating model, and prudent cash flow and land investment strategies have been key drivers of its success.
Click here to know how the company’s overall second-quarter performance is expected to be.
Image Source: Zacks Investment Research
A Look at Q2 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. Additionally, PulteGroup's judicious land investment approach and its emphasis on catering to entry-level buyers, along with prudent marketing strategies (like a mortgage buydown program), are expected to have worked in the company's favor during the second quarter.
Our model predicts Homebuilding revenues to rise 6.7% to $4.37 billion in the second quarter from $4.09 billion in the second quarter of 2023 and an increase from $3.86 billion in the prior quarter. Within the Homebuilding umbrella, we expect home sales to be $4.34 billion, reflecting a 6.8% year-over-year rise and 13.5% sequentially. Land sales are expected to decline 4.7% year over year to $35.8 million and 3.7% sequentially in the second quarter.
PulteGroup expects home deliveries to be approximately 7,800-8,200 units compared with 7,518 homes delivered a year ago. Our model predicts deliveries to grow 6.3% year over year to 7,992 units.
PHM expects a higher average selling price or ASP for the quarter between $540,000 and $550,000 compared with the year-ago level of $540,000. Our model predicts the ASP of homes delivered to inch up 0.5% year over year to $542,500.
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 to 29.2% in the reported quarter from the year-ago period. Our model predicts homebuilding gross margins to be 29.2% for the quarter, down 30 basis points from the year-ago period.
We expect SG&A (as a percentage of home sales revenues) to be 10%, higher than 7.8% reported in the prior-year quarter.
Meanwhile, we expect the company’s new orders to increase 7% year over year and 1.5% sequentially to 8,501 units in the quarter. Backlog is expected to grow 2.8% year over year to 13,938 units.
PulteGroup, Inc. Price and EPS Surprise
PulteGroup, Inc. price-eps-surprise | PulteGroup, Inc. Quote
Overall Q2 Earnings & Revenue Expectations
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $3.20 per share, indicating 6.7% growth from the year-ago figure of $3.00. Also, the consensus mark for this Zacks Rank #3 (Hold) company’s revenues is $4.48 billion, indicating a 6.9% year-over-year rise.
Stocks With Favorable Combinations
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 on their respective quarters to be reported.
Meritage Homes Corporation (MTH - Free Report) has an Earnings ESP of +0.64% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
MTH’s earnings topped the consensus mark in all the last four quarters, with the average being 27%. Earnings for the to-be-reported quarter are expected to grow 3% year over year.
Dycom Industries (DY - Free Report) has an Earnings ESP of +4.43% and carries a Zacks Rank #2 (Buy).
DY’s earnings beat the consensus mark in three of the last four quarters and missed on one occasion, the average surprise being 30.2%. Earnings for the to-be-reported quarter are expected to grow 7.4% year over year.
Comfort Systems USA (FIX - Free Report) has an Earnings ESP of +2.25% and carries a Zacks Rank #2.
FIX’s earnings surpassed the consensus mark in all of the last four quarters, the average surprise being 20%. Earnings for the to-be-reported quarter are expected to increase 61.1% year over year.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.