PulteGroup Inc., the second-largest U.S. homebuilder by market value, reported a third-quarter profit that beat analysts’ estimates as house prices climbed.
Earnings before a tax-related gain were 45 cents a share, the Bloomfield Hills, Michigan-based company said today in a statement. That topped the 36-cent average of 18 analyst estimates, according to data compiled by Bloomberg.
Homebuilders are benefiting from a tight supply of existing homes on the market, which is boosting real estate values even as rising mortgage rates slow demand. PulteGroup has focused on increasing its profit margins rather than the pace of sales, by cutting costs and raising prices. While its orders fell, the company’s average selling price in the third quarter climbed 11 percent from a year earlier to $310,000.
“The company delivered what is arguably the most interesting performance of the quarter,” Stephen East, an analyst at International Strategy & Investment Group LLC in St. Charles, Missouri, said in a note today. While the order decline was “dreadful,” PulteGroup “turned in an income-statement result rivaling the best we see in the quarter -- exceptional.”
The shares gained 7 percent, the most since Sept. 9, to $17.85. It was the second-best performance in the 11-company Standard & Poor’s Supercomposite Homebuilding Index, which rose 3.3 percent.
PulteGroup’s orders dropped 17 percent from a year earlier to 3,781 homes, a sign rising borrowing costs are holding back homebuyers. The average rate for a 30-year fixed mortgage was 4.32 percent at the end of the third quarter, up from 3.35 percent in early May, according to Freddie Mac.
Net income was $2.28 billion, or $5.87 a share, compared with $116.6 million, or 30 cents, a year earlier. The results included gain of $5.42 a share from the reversal of deferred tax assets tied to losses during the housing crash.
PulteGroup’s third-quarter revenue rose to $1.58 billion from $1.3 billion a year earlier. Backlog, an indication of future revenue, was 7,522 homes was valued at $2.4 billion, compared with 7,686 homes with a value of $2.2 billion.
Would-be buyers are taking longer to make purchase decisions because of higher interest rates and prices, Chief Executive Officer Richard Dugas said.
“We have been consistent in our position that the housing recovery off lows of 2011 was driven more by reduction in supply than dramatic rally in demand,” Dugas said on a conference call with analysts. “Buyer demand since 2011 has slowly, but steadily, improved and we expect that the recent slowdown in demand will prove to be a modest pullback in an ongoing multiyear recovery in housing.”
The builder, with a market value of about $6.8 billion, is the biggest after Miami-based Lennar Corp.