Zacks_Analysts' Blog : Pulte Group Tops Estimates - Analyst Blog

Pulte Group, Inc. (PHM) reported a profit of $14 million or 4 cents per share in the fourth quarter of 2011 compared with a loss of $165 million or 44 cents per share in the same quarter of 2010. Before special items, the company’s profit stood at $41 million or 11 cents per share during the quarter, exceeding the Zacks Consensus Estimate of 8 cents per share and the year ago profit of $6 million or 1 cent per share.

Pulte’s revenues rose marginally by 1% to $1.2 billion from the fourth quarter of 2010. The increase in revenues was attributable to a 3% increase in average selling prices to $271,000, which was partially offset by a 2% decrease in closings to 4,303 homes. 

Cost of sales related to home sales was $1.0 billion during the quarter (including $11 million of impairments) compared with $1.1 billion in the prior-year quarter (including $82 million of impairments). 

Excluding impairments, interest expense and merger-related costs, home sale gross margin was 18.6% in the quarter, reflecting an improvement of 200 basis points over the fourth quarter of 2010.

Selling, general & administrative expenses were $117 million, or 10% of home sale revenues, compared with $151 million, or 13% of home sale revenues, in the fourth quarter of 2010. 

Pulte had net new orders of 3,084 homes during the quarter compared with 3,044 homes a year ago.  The company’s contract backlog was 3,924 homes with a constructed value of $1.1 billion as of December 31, 2011 compared with a contract backlog of 3,984 homes, valued at $1.1 billion, as of December 31, 2010.

Revenues in the company’s Financial Services scaled up 6.5% to $1.3 billion. The segment had a pretax loss of $27.4 million in the quarter compared with a profit of $5.3 million in the fourth quarter of 2010.

Annual Results

For full year 2011, PulteGroup reported a narrower loss of $210 million or 55 cents per share compared with a loss of $1.1 billion or $2.90 per share in 2010. Excluding special items, the company had a loss of $2 million or zero cents per share compared with the Zacks Consensus Estimate of a loss of 52 cents per share and the year-ago level of $307 million or 80 cents per share.

Revenues from home sales dipped 9% to $4.0 billion from $4.4 billion in the prior year, driven primarily by an 11% fall in closings to 15,275 homes.  The decrease in unit closings reflects the pulling ahead of demand created by the tax credit in 2010 and the company’s lower community count. Meanwhile, revenues from Financial Services declined 9.5% to $4.1 billion during the year.

Financial Position

Pulte had cash and cash equivalents of $1.1 billion as of December 31, 2011 compared with $1.5 billion as of December 31, 2010. The company had senior notes of $3.1 billion as of December 31, 2011 versus $3.4 billion as of December 31, 2010.

Pulte’s cash flow from operations declined to $17.2 million in 2011 from $590.9 million in the previous year. Meanwhile, capital expenditures increased to $21.2 million from $15.2 million in 2010.

Outlook

Based in Bloomfield Hills, Michigan, PulteGroup engages in the homebuilding and financial services businesses primarily in the U.S. and Puerto Rico. It competes with Lennar Corp. (LEN), KB Home (KBH) and DR Horton Inc. (DHI).

The company expects challenging macroeconomic conditions will persist in 2012. Nevertheless, it expects to be profitable for the year. Currently, it retains a Zacks #3 Rank on its shares, which translates to a short-term (1 to 3 months) rating of Hold”.