Why Is PulteGroup (PHM) Down 3.8% Since Last Earnings Report?

A month has gone by since the last earnings report for PulteGroup (PHM). Shares have lost about 3.8% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is PulteGroup due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts. PulteGroup's Q3 Earnings & Revenues Beat EstimatesPulteGroup Inc. reported impressive results in the third quarter of 2024, wherein earnings and total revenues handily beat the Zacks Consensus Estimate and grew year over year.The quarter’s result reflects the successful execution of the company’s balanced spec and build-to-order operating model. This, alongside the structural shortage of homes from years of underbuilding, continued to favor the company. Thanks to such tailwinds, the home closings during the quarter grew year over year resulting in record third-quarter home sale revenues.Furthermore, PHM invested about $1.4 billion into its business during the quarter, while returning more than $360 million to its shareholders and generating a return on equity of 27% over the past 12 months.The Fed’s turn on lowering interest rates in the latter half of September has sparked momentum in the homebuilding industry as this tool is expected to address the affordability challenges faced by homebuyers. PulteGroup is optimistic about the upcoming market trends and expects to deliver strong earnings in 2024.Inside PHM’s HeadlinesPHM reported earnings of $3.35 per share, which topped the Zacks Consensus Estimate of $3.10 by 8.1% and increased 16% from $2.90 reported a year ago.Total revenues of $4.48 billion also surpassed the consensus mark of $4.26 billion by 5.1% and increased 12% from the year-ago figure of $4 billion.Segmental Discussion of PulteGroupPulteGroup primarily operates through two business segments — Homebuilding and Financial Services.Homebuilding: Revenues from this segment were up 12% year over year to $4.3 billion. The increase in home sale revenues was primarily driven by growth in the number of homes closed. Land sale and other revenues declined to $19.3 million from $39.9 million a year ago.The number of homes closed increased 12% to 7,924 units from the year-ago level. The average selling price of homes delivered was $548,000, almost flat year over year.Net new home orders marginally declined 0.5% year over year to 7,031 units. Yet, the value of new orders rose 2.9% from a year ago to $3.93 billion. PHM’s backlog, which represents orders yet to be closed, was 12,089 units, down 10.8% year over year. In addition, potential housing revenues from the backlog were down year over year to $7.69 billion from $8.13 billion.Home sales gross margin was down 70 basis points (bps) year over year to 28.8%. SG&A expenses (as a percentage of home sales revenues) increased 30 bps to 9.4% from 9.1% a year ago.Financial Services: Revenues from this segment increased 48.4% year over year to $113.8 million. Pretax income for the segment increased 90% to $55 million from the year-ago figure of $29 million. The increase in pre-tax income reflects the benefit of higher volumes in PulteGroup’s homebuilding operations paired with a favorable operating environment.PHM’s FinancialsAt the end of the third quarter, PulteGroup’s cash, cash equivalents and restricted cash were $1.46 billion, down from $1.85 billion at the end of 2023. Net debt-to-capital was 1.4% at the third-quarter end, up from 1.1% at 2023-end.Net cash provided by operating activities was $1.11 billion in the first nine months of 2024 compared with $1.91 billion in the prior-year period. In the reported quarter, the company repurchased 2.5 million common shares for $320 million at an average price of $126.05 per share.GuidanceFor fourth-quarter 2024, the company expects closing 7,900-8,300 homes, depicting a growth from 7,615 homes closed in the year-ago period. The company expects the ASP of the closed units to be $555,000-$565,000, compared with an ASP of $547,000 reported a year ago. The gross margin in fourth quarter is expected to be in 27.5-27.8% range, down from 28.9% year over year.PHM expect tax rate between 24% and 24.5% in fourth quarter, excluding the impact of any potential incremental energy tax credit purchases. It also projects nearly 950 average community count for fourth quarter, which represent an increase of 3% over last year.For 2024, the company expects closing nearly 31,000 homes. Gross margin is expected to be nearly 29%, SG&A expenses within 9.2-9.5% of home sales.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a downward trend in estimates revision.The consensus estimate has shifted -5.3% due to these changes.VGM ScoresAt this time, PulteGroup has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, PulteGroup has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report PulteGroup, Inc. (PHM): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks