PulteGroup Falls as Putback Concern Overshdows Profit

PulteGroup Inc. (PHM), the largest U.S. homebuilder by revenue, fell 2.5 percent after pending home sales missed economists’ estimates and investors grew concerned that mortgage-repurchase demands will increase.

The builder, based Bloomfield Hills, Michigan, told analysts on its third-quarter earnings conference call that its putback requests, or demands from mortgage investors for lenders to repurchase faulty loans, rose in the period. That overshadowed a third-quarter profit that beat analyst estimates on rising revenue.

“Based on management commentary on the call and the recent trend in putbacks, it appears likely that some type of charge may be forthcoming,” Megan McGrath, an analyst at MKM Partners LLC in Stamford, Connecticut, said in an e-mail. “The uncertainty around the timing and eventual size of that charge may have frustrated investors today.”

PulteGroup fell 44 cents to $17.01 at the close of trading in New York. The 2.5 percent drop was the third-worst performance in the 11-member Standard & Poor’s Supercomposite Homebuilding Index, which declined 1.7 percent. Homebuilder stocks fell today after the National Association of Realtors announced a smaller-than-estimate increase in purchase contracts for existing homes September, signaling an uneven recovery.

A slide in PulteGroup’s presentation to analysts today showed that the company’s gross monthly mortgage-repurchase requests climbed to almost 200 in September from about 120 in July.

‘Over Time’

There hasn’t been a “dramatic change,” Chief Financial Officer Robert O’Shaughnessy said.

“We tend to look at these things over time,” he said on the conference call. “Two months or three months, we don’t think necessarily makes a trend. We have to see what that evolves to.”

If repurchases continue at the elevated level, the builder would consider increasing reserves, he said.

PulteGroup reported net income for the third quarter of $116.6 million, or 30 cents a share, compared with a loss of $129.3 million, or 34 cents, a year earlier. The average estimate of 19 analysts in a Bloomberg survey was for earnings of 20 cents a share. Revenue rose 14 percent to $1.3 billion, and orders jumped 27 percent to 4,544 homes.

PulteGroup is on track to be profitable for the full year, Chairman and Chief Executive Officer Richard Dugas said in the earnings statement.

Home Sales

“Although still well below historical levels, the U.S. housing market has realized a meaningful increase in the volume of new home sales for the first nine months of 2012,” Dugas said. “In past cycles, the U.S. housing industry proved to be a powerful engine that could help drive the economy forward and accelerate the pace of a recovery. A similar scenario could again be unfolding.”

U.S. purchases of new homes rose in September to the highest level since April 2010, the Commerce Department said yesterday, as mortgage rates approached record lows and the supply of existing homes for sale tumbled.

PulteGroup has gained 170 percent this year, the best performance in the S&P homebuilding index, which advanced 84 percent.

To contact the reporter on this story: Prashant Gopal in New York at pgopal2@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.