PulteGroup (PHM) Up 4.9% Since Last Earnings Report: Can It Continue?

Core Viewpoint - PulteGroup reported strong second-quarter 2024 earnings, with significant increases in earnings per share (EPS) and revenues, driven by a balanced operating model and strong cash flows [2][4]. Financial Performance - Adjusted EPS for Q2 2024 was $3.58, exceeding the consensus estimate of $3.21 by 11.5% and up 19.3% from $3.00 a year ago [4]. - Total revenues reached $4.6 billion, surpassing the consensus estimate of $4.48 billion by 2.7% and increasing 9.8% from $4.19 billion in the previous year [4]. - Homebuilding segment revenues rose 9.6% year over year to $4.49 billion, with home sale revenues also increasing by 9.6% to $4.45 billion [5]. - Financial Services segment revenues increased 21.1% year over year to $111.7 million, with pretax income rising to $63 million from $46 million a year ago [6]. Operational Highlights - The number of homes closed increased by 8% to 8,097 units, while the average selling price of homes delivered was $549,000, up 2% year over year [5]. - Home sales gross margin improved by 30 basis points to 29.9%, supported by strong homebuyer demand [6]. - New home orders declined 3.7% year over year to 7,649 units, but the value of new orders rose 2% to $4.4 billion [5]. Cash Flow and Capital Structure - Cash, cash equivalents, and restricted cash at the end of Q2 were $1.45 billion, down from $1.85 billion at the end of 2023 [7]. - Net cash provided by operating activities was $657.3 million in the first half of 2024, compared to $1.45 billion in the prior-year period [7]. - The company repurchased 2.8 million common shares for $314 million at an average price of $113.79 per share during the reported quarter [7]. Market Dynamics - Long-term market dynamics favor PulteGroup due to a structural shortage of homes from years of underbuilding, despite short-term impacts from interest rate movements [3]. - The company achieved a 27.1% return on equity over the past 12 months, reflecting effective management of sales price and pace [3]. Industry Comparison - PulteGroup operates within the Zacks Building Products - Home Builders industry, where competitor D.R. Horton reported revenues of $9.97 billion, a year-over-year increase of 2.5% [11]. - D.R. Horton has a Zacks Rank 3 (Hold), while PulteGroup holds a Zacks Rank 2 (Buy), indicating a more favorable outlook for PulteGroup [10][11].