Bull Of The Day: PulteGroup (PHM)

PulteGroup, Inc. (PHM - Free Report) is able to cash in as the unemployment rate remains near all-time lows and, thanks to the Fed rate cuts, mortgage rates have also fallen. This Zacks Rank #1 (Strong Buy) is expected to see double digit earnings growth in 2020.

PulteGroup is one of America's largest homebuilders with operations in more than 40 markets around the country. Its brands include Centex, Pulte Homes, Del Webb, DiVosta Homes, American West and John Wieland Homes and Neighborhoods.

Its segments include 30% entry-level and first-time buyers, 30% move-up buyers, 15% luxury and 25% active adult.

The diverse strategy means that when one is lagging, the others are there to pick up the slack.

Another Earnings Beat in the Fourth Quarter

On Jan 28, Pulte reported its fourth quarter 2019 results and beat the Zacks Consensus by $0.06. Earnings were $1.14 versus the Zacks Consensus of $1.08.

The company hasn't a great track record of meeting and/or beating the consensus estimate.

It hasn't missed since 2015.

Revenue rose 1% to $2.9 billion as net new orders rose 33% compared to the fourth quarter of 2018 to 5,691 homes.

Average community count for the fourth quarter of 2019 was 865 communities, up from 825 communities in the year ago period.

Unit backlog rose 20% year-over-year to 10,507 homes which a dollar value of $4.5 billion. The dollar value was up just 18% year-over-year as Pulte has been working on expanding its first-time home buyers business. Those homes typically have a lower sales price.

Gross margin, a key metric for home builders, was 22.8%, up from 21.5% a year ago.

Still Seeing Labor Constraints

With unemployment at 3.6%, it's been hard for the homebuilders to find enough labor to meet demand.

Pulte announced it was acquiring Innovative Construction Group, an off-site solutions provider focused on single family and multifamily wood framed construction.

Basically, the frame can be manufactured elsewhere.

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Disclaimer: Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the  more

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Mike Nolan 5 months ago Member's comment

$KBH maybe it's the bull of yesterday or tomorrow, but today it's down a buck. Which end of bull were you looking at to make that call?