PulteGroup Inc., the largest U.S. homebuilder by revenue, rose the most since 2008 after reporting a better-than-estimated profit and 32 percent jump in orders for the second quarter.
Net income was $42.4 million, or 11 cents a share, compared with a loss of $55.4 million, or 15 cents, a year earlier, the Bloomfield Hills, Michigan-based company said today in a statement. The average estimate of 10 analysts in a Bloomberg survey was for earnings of 6 cents a share.
U.S. homebuilders are becoming more profitable as record-low mortgage rates and stabilizing prices lure buyers to new houses. PulteGroup, which had losses in six of the last eight quarters, has been focusing on reducing expenses after the acquisition of Centex Corp. in August 2009, and selling out of older, less profitable communities.
The company had “an exceptional quarter,” Stephen East, an analyst with International Strategy & Investment Group LLC, wrote in a note today. It “has turned the corner and is accelerating, we expect its equity to outperform as well.”
PulteGroup jumped 18 percent to $11.86 in New York trading, the biggest increase since November 2008. It was the best performer in the 11-member Standard & Poor’s 1500 homebuilder index, which advanced 6.4 percent.
PulteGroup’s second-quarter orders increased to 5,578 homes, with 7 percent fewer communities. Backlog, an indication of future sales, climbed 31 percent to 7,560 homes.
Revenue from home sales rose 14 percent to $1.02 billion, driven by an 8 percent increase in the average selling price to $268,000. Home closings climbed 5 percent. The adjusted gross margin on home sales, a measure of profitability, increased to 20.3 percent from 17.1 percent a year earlier.
“This is the best financial performance in years, and we’re doing a few high fives,” Chairman and Chief Executive Officer Richard J. Dugas said during a conference call with analysts today.
Goldman Sachs Group Inc. this week reiterated its buy rating on PulteGroup and raised the homebuilding industry to attractive from neutral, saying the market is poised for a “strong” recovery. Builders broke ground on 760,000 houses last month at an annual pace, up 6.9 percent from May and the fastest rate in almost four years, the Commerce Department reported last week.
PulteGroup is seeing improvements in markets across the country, Dugas said. The Southwest is the top region and Michigan is an “amazing story” because of the renewed auto industry, he said. While Chicago continues to “struggle,” it seems to have bottomed, he said.
A broad recovery remains uneven. Sales of new U.S. homes unexpectedly dropped in June from a two-year high. Purchases decreased 8.4 percent from the prior month to a 350,000 annual rate, the weakest since January, the Commerce Department said yesterday. Contracts to buy existing homes fell 1.4 percent in June, the National Association of Realtors said today.
Low inventory may be limiting home sales. There were 144,000 newly constructed houses on the market in June, little changed from a record low of 143,000 in May, according to the Commerce Department.
“Along with low interest rates, higher rental lease costs and several years of pent-up demand, we believe that the most significant driver of the industry’s success in 2012 is the low level of home inventory available to prospective buyers,” Dugas said during the call. “Consumers do not have a lot of choices, as many of the newer existing homes are often in the wrong location while older homes are not always in great condition.”
PulteGroup is limiting sales in some markets where demand is becoming “overheated,” Dugas said.
“Such actions are not widespread, but it is a dramatic change from just a year ago,” he said.