PulteGroup Results Beat Views

After weeks of sparring between the founder and chief executive of home builder PulteGroup, the company on Thursday reported profit and revenue increased more than expected in the first quarter on top of more home closings and an increase in sales prices.

Chairman and Chief Executive Richard Dugas, whose performance has come under attack from company founder William J. "Bill" Pulte, steered clear of discussing the controversy during a conference call with investors.

"We will not be responding to these attacks or otherwise be discussing the Pultes on this call other than to stay that we stand by the completeness and accuracy of our previous disclosures," Mr. Dugas said in opening remarks. "I want to take this opportunity to assure all investors that we are busy running this company and remain squarely focused on continuing to deliver value for you."

For the three months ended March 31, PulteGroup reported profit of $83.3 million, or 24 cents a share, up from $55 million, or 15 cents a share, in the same period a year earlier. Profit was aided by a one-time income-tax benefit of $10 million.

Revenue grew 26% to $1.43 billion. Analysts polled by Thomson Reuters had expected earnings of 20 cents a share on revenue of $1.36 billion.

Shares of PulteGroup closed down 5 cents to $19.13 on Thursday.

Over the past two weeks, PulteGroup has been at the center of a public battle between Mr. Dugas and Mr. Pulte, the company's largest shareholder. Mr. Pulte, 83 years old, has argued that Mr. Dugas and the board's lead director, James Postl, need to step down immediately amid what he says is poor performance compared with rival home builders.

The company announced two weeks ago that Mr. Dugas would retire next year, but Mr. Pulte has argued that waiting another year would further delay needed changes "to the detriment of shareholders."

Much of the dispute comes down to a difference in philosophy: Mr. Pulte believes the company has lost ground to competitors such as D.R. Horton Inc. and Lennar Corp., which have pursued more aggressive growth as the housing market has rebounded. PulteGroup's home deliveries for the fiscal year ending December 2015 were down slightly from a year earlier, while D.R. Horton's deliveries were up 27% and Lennar's jumped by 15% in fiscal 2015.

PulteGroup said it has worked to reward shareholders through increased dividends and stock repurchases, and has tried to avoid too many risky land purchases that could become a liability in a downturn. Executives made that strategy clear in Thursday's call.

PulteGroup President Ryan Marshall said the company would be pursuing "responsible growth" through a "disciplined investment process."

"This means delivering more volume in a profitable, responsible and risk-adjusted way, and avoiding the trap of chasing growth for growth's sake," Mr. Marshall said on the call with investors.

After the call, Mr. Pulte criticized the results as compared with competitor D.R. Horton, which also reported earnings Thursday. "PulteGroup continues its severe, multiyear underperformance versus peers" on factors such as pretax earnings, home deliveries and overhead control, Mr. Pulte said in a statement.

Analysts said the results were a mixed bag. Closings increased 17% from a year earlier, but the company had higher selling, general and administrative expenses.

"You don't have a perfect mix on this," said Bob Wetenhall, an analyst with RBC Capital Markets who follows the home-building industry. "It's not a clean, neat story."

Jack Micenko, an analyst with Susquehanna Financial Group, said much of the recent drama involving PulteGroup misses a key point: The company for the past five years has simply pursued a different strategy than higher-volume competitors such as D.R. Horton and Lennar.

Those two companies came into the downturn with better balance sheets, allowing them to buy up land at cheap rates on which they are now capitalizing. PulteGroup, on the other hand, came into the downturn much more leveraged and has been working to improve its balance sheet, he said.

PulteGroup is "running the business to maximize profitability, not drive growth," Mr. Micenko said. "This is not a recent turn of events."

Write to Chris Kirkham at [e-mail] and Joshua Jamerson at [e-mail]

(END) Dow Jones Newswires

April 21, 2016 16:55 ET (20:55 GMT)

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