With the U.S housing market on a steady recovery path due to favorable macroeconomic elements, U.S home builder PulteGroup (PHM, Financial) posted good results for the second quarter. The company managed to post impressive growth in profit. However, there was a marginal improvement in revenue. The momentum remains positive for PulteGroup. However, the company also saw a slight decline in orders, which is a matter of worry for PulteGroup. PulteGroup is trying to improve its market position through various strategies. Let us have a look at PulteGroup’s overall business.
Performance and more
In the recently reported second quarter, PulteGroup’s revenue edged up 0.5% to $1.29 billion which is slightly up over $1.28 billion in the same period a year ago. Homes sold at higher-than-expected prices led the company to post a remarkable improvement in profit, climbing by 15%. But the analysts were disappointed by the rise in profit as they were expecting it to post more profit than it did. On the earnings part, PulteGroup posted EPS of $0.25; however, analysts expected it to post $0.26 per share.
Despite a decline in orders, the ongoing gains that the company posted in its second quarter earnings call reflects that the company is well in line with its specific initiatives. The management thinks that there is much room for improvement in the future. The U.S housing market is positive, the economy is also improving, and the growth in employment is already providing support to this industry. These can be growth drivers for PulteGroup in the future, and the company has plans to increase its investments into its business to see good returns in the days to come.
Conditions can improve
PulteGroup is also seeing improving demands at its Centex communities. The meaningful increase in the performance of its Centex communities is an indication of the future demand growth among the entry-level buyers. This is an encouraging sign for PulteGroup, which it thinks will benefit the company well in the days to come. In addition, the company is also seeing solid increase in sales with its Del Webb communities. So with this growing demand environment, PulteGroup is laser focusing on each of its important segments.
PulteGroup is undertaking several key strategies to improve its profitability. It has undertaken several combinations of pricing strategies along with the gains in the operating efficiency and savings associated with the lower interest costs. It expects that these moves by it will help it improve its margins in future.
PulteGroup is further increasing its investment into its business and it is confident of generating better results on is its invested capital. This investment will also help the company carry out its home building operations more efficiently. However, due to the slight decline in the orders the company is expecting the housing data to be slightly volatile in next few months. But PulteGroup is optimistic about over all conditions and is expecting positive growth on the back of growing demands.
PulteGroup is pleased with its progress. It is focusing on making the best use of its pricing strategies. It is on track with exercising its plans to build homes for the lowest price. In fact the company is pleased with the progress of this metric as it has grown by 13% in this regard on a year-over-year basis. Seeing such a robust pace of improvement PulteGroup is confident of exiting all its managed plans on a strong note by the end of this year.
Conclusion
The economy is making progress, which will help PulteGroup to regain lost ground. However, for the next five years, the company’s earnings are expected to grow by a CAGR of just 8.06%, which is not so impressive. So, considering all the facts, it can be stated that PulteGroup is a good investment now, but it will require patience.
