Wolfe Research lifts PulteGroup, says it can generate over $2.3B in operating cash flow this year

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Wolfe Research lifts PulteGroup, says it can generate over $2.3B in operating cash flow this year
Credit: © Reuters.

By Sam Boughedda

Wolfe Research raised PulteGroup (NYSE: PHM ) to Outperform from Peer Perform and established a $64 price target on the stock in a note to clients on Wednesday.

Analysts said "balance" is the "appropriate word when describing PHM, from its consumer segmentation and Spec/BTO strategy to its steady capital allocation and highly profitable land/operating philosophy, which some investors have historically viewed as 'boring.'"

However, they "find little boring in this story."

"PHM can potentially generate $2.3B+ in '23 Op Cash Flow (on a mere $12.5B Mkt Cap, or ~19% CF Yield), driving a $2 per share Net Cash position by year-end after $750M of share repo," wrote the analysts. "PHM provides the potential for ~8% Closings upside to ~25.0K units versus our 23.2K estimate should demand remain healthy as the company has rebuilt its Spec pipeline to ~40% of HUC (7.2K units)."

The analysts added that they expect PHM will "consistently generate GM that is 300-to-400 bps above peer average throughout 2023" while having one of the healthiest balance sheets in the group.

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