A month has gone by since the last earnings report for PulteGroup (PHM). Shares have added about 4.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is PulteGroup due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

PulteGroup Q2 Earnings & Revenues Top, Margins Rise Y/Y

PulteGroup reported stellar results in second-quarter 2024, wherein earnings and revenues handily beat the Zacks Consensus Estimate.

In the second quarter of 2024, PulteGroup saw significant benefits from key factors driving its success. The company's balanced operating model resulted in increases in closings, average sales price, and gross margin, which collectively led to a 19.3% increase in earnings per share (EPS). Strong cash flows provided the flexibility to invest in business growth, return funds to shareholders, and strengthen the overall capital structure.

Despite short-term impacts from interest rate movements, long-term market dynamics, driven by a structural shortage of homes from years of underbuilding, continued to favor PulteGroup. Effective management of sales price, pace, and starts on a community-by-community basis enabled the company to achieve high returns on invested capital and equity, evidenced by a 27.1% return on equity over the past 12 months.

Inside the Headlines

PHM reported adjusted EPS of $3.58, which topped the consensus mark of $3.21 by 11.5% and increased 19.3% from $3.00 reported a year ago. The current quarter's adjusted EPS excludes a $52 million pre-tax insurance benefit, equating to 19 cents per share, and a $13 million benefit, or 6 cents per share, from the favorable resolution of certain state tax matters. The prior-year quarter excludes a $65 million pre-tax insurance benefit, amounting to 21 cents per share.

Total revenues of $4.6 billion beat the consensus mark of $4.48 billion by 2.7% and increased 9.8% from the year-ago figure of $4.19 billion.

Segment Discussion

PulteGroup primarily operates through two business segments — Homebuilding and Financial Services.

Revenues from the Homebuilding segment were up 9.6% year over year to $4.49 billion. Home sale revenues of $4.45 billion increased 9.6% year over year, mainly due to the solid homes closed and higher pricing. Land sale revenues rose 5.9% from a year ago to $39.8 million.

The number of homes closed increased 8% to 8,097 units from the year-ago level. The average selling price of homes delivered was $549,000, up 2% year over year.

New home orders declined 3.7% year over year to 7,649 units for the quarter. Yet, the value of new orders also rose 2% from a year ago to $4.4 billion.

PHM’s backlog, which represents orders yet to be closed, was 12,982 units, down 4.2% year over year. In addition, potential housing revenues from the backlog were down 1% from the prior-year quarter to $8.11 billion.

Home sales gross margin was up 30 bps year over year to 29.9% in the reported quarter, backed by ongoing strength in homebuyer demand and a favorable geographic mix of homes closed. SG&A expenses (as a percentage of home sales revenues) increased 30 bps to 8.1% from 7.8% a year ago.

Revenues from the Financial Services segment increased 21.1% year over year to $111.7 million. Pretax income for the segment increased to $63 million from the year-ago figure of $46 million.

Financials

At the end of the second quarter, cash, cash equivalents and restricted cash were $1.45 billion, down from $1.85 billion at the end of 2023. Net debt-to-capital was 1.8% at the second-quarter end, up from 1.1% at the 2023-end.

Net cash provided by operating activities was $657.3 million in the first half of 2024 compared with $1.45 billion in the prior-year period.

In the reported quarter, the company repurchased 2.8 million common shares for $314 million at an average price of $113.79 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, PulteGroup has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, PulteGroup has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

PulteGroup belongs to the Zacks Building Products - Home Builders industry. Another stock from the same industry, D.R. Horton (DHI), has gained 9% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.

D.R. Horton reported revenues of $9.97 billion in the last reported quarter, representing a year-over-year change of +2.5%. EPS of $4.10 for the same period compares with $3.90 a year ago.

For the current quarter, D.R. Horton is expected to post earnings of $4.14 per share, indicating a change of -7% from the year-ago quarter. The Zacks Consensus Estimate has changed 0% over the last 30 days.

D.R. Horton has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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