PulteGroup Had Strong Q1 Earnings but Founder Calls for Change
PulteGroup reported rise in EPS
PulteGroup (PHM) reported net income of $83 million, or $0.24 per share, which beat the Wall Street estimate of $0.20 per share. The company earned $0.15 per share in the corresponding quarter last year. Selling, general, and administrative expenses accounted for 13.7% of revenues compared to 14.8% a year ago. Pulte is hiring workers in order to manage its increase in home deliveries, and it also saw an increase in SG&A associated with the Weiland transaction.
Financial services accounted for pretax income of $10 million. Last year in the first quarter, pretax income from financial services was $5 million. The mortgage capture rate was 81% in the first quarter compared to 82% a year ago.
Balance sheet highlights
PulteGroup finished the quarter with a cash balance of $1 billion and a debt-to-capitalization ratio of 35%. The company repurchased 3.1 million shares of stock during the quarter, paying an average of $16.36 a share.
Start thinking about builders that focus on first-time homebuyers
In many ways, PulteGroup and D.R. Horton (DHI) are first-time homebuyer plays. We’re starting to see some signs of life there. Note that the government is pursuing additional policies designed to benefit the first-time homebuyer. This should help PulteGroup.
The National Association of Realtors noted in its recent releases on existing home sales that the first-time homebuyer has held steady at 30% of all buyers. This is still below the norm, but it’s important to remember that Millennials are bigger than Baby Boomers. D.R. Horton, which recently launched its Express brand, noted on its conference call that it isn’t seeing much competition from other builders in this segment.
The move-up and luxury buyers are more represented by Lennar (LEN) and Toll Brothers (TOL). However, the luxury end of the market remains strong.
An alternative way to invest in the homebuilder sector is with the SPDR S&P Homebuilder ETF (XHB).
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