PulteGroup earnings: Homebuilder's stock pops after quarterly results top estimates
PulteGroup, Inc. (PHM) stock popped Tuesday after the homebuilder reported quarterly results that exceeded expectations as buyers reentered the housing market.
“Within an evolving macro environment, consumers across all buyer segments and price points continue to demonstrate a strong desire for homeownership,” PulteGroup President and CEO Ryan Marshall wrote in the press release.
Earnings per share for the homebuilder's fiscal first quarter came in at $2.35, beating the $1.80 expected by analysts, according to data compiled by Bloomberg. Revenue for the quarter totaled $3.5 billion, more than the $3.28 billion expected by analysts.
Shares of the company gained as much as 3% following the results. The stock was trading at $65.29, up 2.24% in afternoon trading. By comparison, the S&P 500 index was down 1.41%.
'General sense of stability in rates'
While PulteGroup's purchase contracts slipped 8% to 7,354 homes during the quarter, that decline was better than expected with analysts estimating only 5,890 purchase contracts during the quarter.
“Home sales are benefiting from recent declines in mortgage rates, but I also think just having a general sense of stability in rates is important to consumer confidence,” Marshall told analysts on the earnings call Tuesday.
First-time homebuyers were the large part of the homebuilder's success in the quarter. Net new orders to first-time buyers jumped 18% year over year, while move-up orders declined by 20% and active adult orders dropped by 22%.
While canceled contracts came in at 13% during the quarter, up from 4% in the same period last year, these were less than 200 basis points higher than the fourth quarter.
"So cancellations are beginning to stabilize," Pulte CFO Robert O’Shaughnessy said in the earnings call.
“Given improvements in demand conditions, in the broader interest rate environment, as well as a generally limited inventory of existing homes, we are starting to see the pressure on selling prices ease in many of our markets,” Marshall added.
The average sales price was $545,000 during the quarter, up almost 9% year over year, Pulte reported.
“Overall market conditions continue to improve as we experience strong demand and are finding opportunities to reduce incentives and/or increase prices in many communities,” Marshall said on the earnings call.
PulteGroup ended the quarter with a backlog of 13,129 homes, down 34% from the previous year, beating expectations from analysts of 12,487 homes. The average sales price in backlog was $608,000, a 5% gain over the prior year.
The homebuilder's results come as new data out on Tuesday showed that new home sales grew more than expected in March, the Census Bureau said, with tight pre-owned home inventory continuing to boost demand for new properties.
“A lack of resale inventory combined with many builders offering price incentives helped to push new home sales higher in March,” Alicia Huey, chairman of the National Association of Home Builders (NAHB) and a builder and developer from Birmingham, Ala, wrote in a statement.
“However, sales are down 3.4% compared to a year ago because of the shortage of electrical transformer equipment and building material price volatility,” Huey added.
Two indexes on Tuesday also showed that home prices grew month over month in February, topping expectations. The Southeast remains the country’s strongest region, with price gains of 7.8% in February, according to the S&P CoreLogic Case-Shiller home price index.
That meshes with Pulte's results, according to Marshall.
“We're seeing continued strength in the Florida markets, the Southeast markets, in Texas," he said. "And then in terms of markets that are more challenging, it would really be the western markets, particularly the ones in the high-priced coastal areas."
While ongoing volatility for mortgage rates and housing costs are expected, builders are increasing their footprint among communities — including Pultegroup, which expanded its count by 20% over the last year, per John Burns Research and Consulting.
Indeed, at the end of the first quarter, the homebuilder grew its homes under construction to 16,872. Looking onward, the homebuilder is forecasting to deliver between 7,000 and 7,400 homes in the second quarter.
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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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