Pulte Group (PHM) beat the Zacks Consensus Estimate about two months ago and since that time we have seen a great post earnings drift higher. The stock is a Zacks Rank #2 (Buy) and today it is the Bull of the Day.
The Numbers
PHM beat the Zacks Consensus Estimate of $0.50 by $0.07 for a 14% positive earnings surprise. Revenues came in a little above expectations at $2.06 billion for a 9.3% positive revenue surprise.
Post Earnings Drift
Following the beat, the stock jumped 4.2% in the session immediately the release. That wasn't exactly an out sized move might make investors believe that the shipped has sailed. Big beats in tech stocks can cause investors to chase stocks that are moving higher, something we call "FOMO", or Fear Of Missing Out.
The truth is, the rally in this stock was just getting started. Since the beat the stock has continued to gain ground, tacking on another 13%.
This is the definition of a post earnings drift higher.
Description
Pulte Group is in the home building business. The company is involved in the acquisition and development of land primarily for residential purposes and the construction of housing on land. Pulte Group was founded in 1950 and is headquartered in Atlanta, Georgia.
Earnings History
The recent earnings history for PHM is a mixed bag with three beats and four misses in the last seven reports.
The recent beat of 14% is the biggest beat, with the two preceding beasts coming in at 4.8% and 2.8% respectively.
Estimates
The FY16 Zacks Consensus Estimate has recently inched higher. The number stood at $1.53 in January of this year, but then kicked higher to $1.54 following the beat at the end of the month. Since that time the Zacks Consensus Estimate has remained at $1.54.
The FY2017 Zacks Consensus Estimate moved from $1.84 in December of last year to $1.87, which is where it stands today.
Valuation
Normally I look for growth stocks, I want that big burst in revenue to drive earnings and propel the stock higher. There are a lot of tech stocks that have potential for such a move, but even I can recognize when a value stock looks too good to pass up on.
PHM has a forward PE of 12x, and that is right in line with the industry average. The price to book multiple of 1.4x is just below the 1.6x industry average, and the price to sales multiple is also in line with the industry average.
After reading that, you might start to wonder where the value is, and as I see it, its in the growth. Analysts are calling for topline growth of 19% for PHM in 2016, while the industry average is looking at 15%.
2017 Looks even better with 13% topline growth for PHM versus only 9% for the industry average. The analysts are also calling for EPS growth of 22% in 2017 for PHM compared to 18% for the industry average.