PulteGroup Inc., the largest U.S. homebuilder by revenue, reported a narrower-than-expected first-quarter loss and said it expects to be profitable in the second half of the year. The shares climbed more than 3 percent.
The net loss in the first quarter was $39.5 million, or 10 cents a share, compared with $12.5 million, or 3 cents, a year earlier, the Bloomfield Hills, Michigan-based company said today in a statement. The average estimate of 17 analysts in a Bloomberg survey was for a loss of 14 cents a share.
PulteGroup focused on cutting costs in the face of weak demand for new homes. Selling, general and administrative expenses for the quarter decreased 10 percent from a year earlier to $136 million. The rate of cancellations declined and visits to the company’s sale centers increased, said Richard Dugas, chairman and chief executive officer.
“Assuming market conditions remain stable, we have put ourselves in a position to return to profitability in the back half of the year.” Dugas said on a conference call with investors. “Now it’s about effort and execution, which are clearly within our control.”
Roger Cregg, chief financial officer, said the builder expects profits in both the third and fourth quarters.
PulteGroup rose 26 cents, or 3.3 percent, to $8.24 as of 4:15 p.m. in New York Stock Exchange composite trading. The gain was the largest among the 12 companies in the Standard & Poor’s Supercomposite Homebuilding Index, which increased 0.1 percent.
The first-quarter results were “somewhat encouraging,” Vincent Foley and Cedric Morris, analysts with Barclays Capital Inc. in New York, said in a research note. “Operating trends were better than expected, particularly as it relates to new orders.”
Net new orders rose to 4,345 homes from 4,320 a year earlier and the cancellation rate decreased to 16 percent from 18 percent. Revenue slipped to $805.2 million from $1.02 billion.
The builder’s year-ago sales were boosted by a government tax incentive for homebuyers, valued at as much as $8,000, that ended in April 2010. Builders have struggled as tighter lending, unemployment near 9 percent and competition from lower-priced foreclosures reduce demand. Purchases of new houses were at an annual pace of 300,000 last month, close to the record low of 270,000 in February, the Commerce Department said April 25.
“Housing is profoundly weak and most of the builders, Pulte included, serve the entry and mid-level market so there’s a lot of competition there,” Vicki Bryan, senior bond analyst for Gimme Credit LLC in New York, said before the report.
Moody’s Investors Service lowered its outlook for PulteGroup on April 21 to stable from positive while saying the builder’s greater “size, scale and diversification” after its August 2009 purchase of Centex Corp. will be a benefit when the industry begins to turn.
“The change in outlook back to stable from positive reflects Moody’s expectation that both Pulte’s improvement in operating performance and the homebuilding industry’s return to a more normal operating environment will take longer to materialize than had earlier been anticipated,” the ratings company said.