PulteGroup Profit Jumps After Builder Increases PricesPrashant Gopal
PulteGroup Inc., the second-largest U.S. homebuilder by market value, climbed after reporting fourth-quarter earnings more than tripled as it raised prices and trimmed costs.
Net income increased to $220.1 million, or 57 cents a share, from $58.7 million, or 15 cents, a year earlier, the Bloomfield Hills, Michigan-based company said today in a statement. That compares with a 46-cent average estimate of 19 analysts, according to data compiled by Bloomberg.
PulteGroup has focused on increasing house prices and managing spending as rising mortgage rates cut into homebuyer demand by making purchases more expensive. The builder’s average selling price gained 13 percent in the fourth quarter from a year earlier to $325,000, while orders fell 18 percent.
The company is “benefiting from earlier efforts to raise prices,” Robert Curran, a managing director at Fitch Ratings in New York, said in a telephone interview yesterday. “Though their orders may not look impressive, the average sales price will be up nicely.”
New-home purchases in the U.S. dropped 7 percent in December from the previous month, suggesting that rising prices and mortgage rates discouraged buyers, Commerce Department figures showed earlier this week.
D.R. Horton Inc., the largest U.S. homebuilder by revenue, said this week that sales accelerated during the first few weeks of January, an early sign of strength for the spring selling season, which traditionally starts after the Super Bowl football championship, being played this weekend.
PulteGroup Chief Executive Officer Richard Dugas said the company’s sales momentum began building in December, which is earlier than normal.
“It’s hard to predict exactly what the spring selling season will bring,” he said on a conference call with analysts. “But at this point we believe it’s going to be a good one.”
Fourth-quarter revenue increased to $1.61 billion $1.48 billion a year earlier. Backlog, an indication of future revenue, totaled 5,772 homes valued at $1.9 billion, compared with 6,458 homes with a value of $1.9 billion in the last three months of 2012.
PulteGroup rose 1.8 percent to $19.77 today. The shares lost 6.1 percent in the past 12 months, compared with a 2.6 percent decline in the 11-company Standard & Poor’s Supercomposite Homebuilding Index. PulteGroup, with a market value of about $7.5 billion, is the largest U.S. builder after Lennar Corp.