On Wednesday, PulteGroup, Inc. (NYSE:PHM) received an updated price target from BTIG following a report of strong second-quarter earnings. The new target is set at $139.00, up from the previous figure of $133.00, while the Buy rating on the stock remains unchanged.
The home construction company's earnings surpassed expectations, with a headline EPS of $3.83 and an adjusted EPS of $3.58, outperforming the analyst's estimate of $3.30 and the consensus of $3.27.
The earnings beat was attributed to various factors including a higher gross margin, increased deliveries, a rise in average selling price (ASP), and a boost from the company's financial services pre-tax income (PTI).
Additionally, a reduction in selling, general and administrative expenses (SG&A) relative to sales also contributed to the favorable results. This was partially offset by a 4% decline in orders, which did not meet the expected 7% growth predicted by the firm and the 6% consensus.
Management's tone was described as cautious, noting inconsistent traffic and order flow during the second quarter. Although traffic was reported to be solid in July, the trend in orders did not align with the analyst's more optimistic projections. PulteGroup's strategy appears to be focused on maintaining resilience in the move-up demand segment, with a slight decrease in incentives indicating a preference not to pursue volume aggressively.
Despite the drop in orders, the company's full-year 2024 guidance remains largely the same, with gross margins expected to stay within the 28.5% to 29.0% range for the second half of the year. The guidance does not take into account potential lower interest rates or a significant economic downturn. The third-quarter guidance provided by the company aligns with the firm's projections.
In light of the second-quarter performance, BTIG has adjusted its earnings per share (EPS) estimates for PulteGroup. The EPS forecast for 2024 has been increased to $13.60 from $13.05, reflecting the earnings beat.
However, the 2025 EPS projection has been slightly reduced to $14.00 from $14.10, taking into account expectations of softer volumes balanced by a more aggressive share repurchase strategy. The firm anticipates that PulteGroup's return profile will continue to outperform its peers in the intermediate term.
In other recent news, PulteGroup reported a strong second quarter in 2024, marking a 19% increase in earnings to $3.83 per share. The company also saw an 8% increase in closings and a 2% rise in average sales price.
Despite facing challenges such as higher interest rates and affordability issues, PulteGroup is optimistic about the housing market's long-term prospects. The company's financial services operations reported a pre-tax income of $63 million in Q2, up from $46 million year-over-year.
PulteGroup is expected to close between 7,400 and 7,800 homes in Q3, with a full-year target of 31,000 homes. The company is also making progress in land banking, aiming to increase it from 50% to 70%.
InvestingPro Insights
In the context of PulteGroup's recent earnings report and BTIG's updated price target, the following InvestingPro Insights provide additional data for investors considering the company's stock. PulteGroup (NYSE:PHM) has demonstrated financial resilience, with a market capitalization of $26.43 billion and a P/E ratio that stands at a competitive 9.99. Adjusted for the last twelve months as of Q1 2024, the P/E ratio slightly improves to 9.59.
InvestingPro Tips highlight that PulteGroup has a commendable dividend track record, having raised its dividend for 6 consecutive years and maintained payments for 12 consecutive years, which is a testament to its financial stability. Additionally, the company's stock has delivered a high return over the last year, with a 61.23% price total return. This performance is underpinned by a solid gross profit margin of 29.66% and an impressive return on assets of 17.45% for the same period.
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