PulteGroup Inc. (PHM), the largest U.S. homebuilder by revenue, reported first-quarter earnings that beat analyst estimates as an accelerating housing recovery fueled sales and led to higher prices.
Net income was $81.8 million, or 21 cents a share, compared with a loss of $11.7 million, or 3 cents, a year earlier, the Bloomfield Hills, Michigan-based company said today in a statement. The average estimate of 19 analysts was for profit of 15 cents a share, according to data compiled by Bloomberg.
Demand for new houses has jumped as buyers seeking to take advantage of low mortgage rates face a tight supply of existing homes on the market. U.S. new-home sales climbed to an annual pace of 417,000 in March, capping the strongest quarter since 2008, the Commerce Department reported this week. Barclays Plc two days ago raised its rating on PulteGroup and four other homebuilders in a report headlined “Fast and Furious.”
“We now see things coming together much more suddenly,” wrote Stephen Kim, a Barclays analyst in New York. “We forecast new-home prices to be up 10 percent and 8 percent in 2013 and 2014, respectively, up nearly 30 percent in three years.”
PulteGroup is increasing prices faster than the rising costs of land, lumber and labor by deliberately limiting the supply offered to consumers and focusing on more expensive houses for move-up buyers, Chief Executive Officer Richard Dugas Jr. said today.
“Volume is not the focus for the company,” Dugas said on a conference call with investors. “It’s driving better returns.”
PulteGroup’s total revenue rose to $1.16 billion from $881 million a year earlier. The company sold 3,833 homes for an average price of $287,000, compared with 3,117 homes for an average $261,000 a year ago. Backlog, an indication of future revenue, jumped to $2.41 billion from $1.59 billion.
Orders climbed 4 percent to 5,200 homes, with 14 percent fewer communities. That trailed growth reported by other homebuilders, said Adam Rudiger, an analyst with Wells Fargo & Co. in Boston. Adjusted gross margin on home sales increased 4.2 percentage points from a year earlier to 22.9 percent.
“Although order growth underperformed peers’ and missed consensus expectations, this shortfall was offset by strong improvement in gross margin,” Rudiger, who rates PulteGroup “market weight,” wrote in a note today.
PulteGroup climbed 5.6 percent to $20.79. The stock is up 14.5 percent this year, compared with a 14 percent gain for the 11-member Standard & Poor’s Supercomposite Homebuilding Index.
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