Home Builder Pulte Tops Earnings Expectations--Update

By Lisa Beilfuss 

Home builder PulteGroup Inc. said its second-quarter profit rose, as order growth and a gain stemming from a legal settlement offset soft closings.

Adjusted per-share earnings topped expectations, though revenue slipped and missed estimates.

Climbing consumer confidence, low mortgage rates and low inventory have helped spur new-home sales over recent months. The Federal Reserve's policy-setting committee in its latest assessment signaled a more optimistic shift in its view of the housing market, and the annual sales pace hit a seven-year high in the most recent report from the U.S. Census Bureau.

Chief Executive Richard Dugas on Thursday said the company is "pleased with market conditions" that "demonstrate that the recovery in U.S. housing remains on track."

Orders grew 7% over the quarter to 5,118 homes, though less than some analysts expected. Jack Micenko of Susquehanna Investment Group, for example, expected a 10% increase to 5247 units. Texas was the weak spot, with orders there off 13%. On a call with analysts, Mr. Dugas pointed to rain-induced production delays across the state and soft demand particularly in Houston, where much of the economy is tied to the slowing energy sector.

The value of new orders rose 11% to $1.8 billion, which the company called its best quarterly order value since before the financial crisis. Backlog totaled $3.1 billion, up from $2.8 billion a year earlier and the highest since 2007.

The Atlanta-based home builder, one of the nation's largest, said closings fell 1% to 3,744 homes, offsetting a 1% increase in the average price to $332,000. Closings were lower in all regions except for the North and fell most in Texas, where they were down 15% from last year's quarter.

In all for the June period, Pulte booked profit of $103.3 million, or 28 cents a share, up from $41.9 million, or 11 cents, a year earlier. Earnings benefited from a legal settlement that added $27 million, or 5 cents a share. The prior year's quarter was hurt by charges that shaved 14 cents off of per-share earnings.

Revenue declined 0.5% to $1.28 billion.

Analysts anticipated 26 cents in earnings per share and $1.37 billion in revenue.

Home building gross margin slipped to 23.3% from 23.5%. Pulte's chief financial officer said margins in the third and fourth quarters would be "comparable to the 23.3%" the company posted in the second quarter, adding that Pulte is on track to surpass its full-year margin guidance of 23%.

Shares in the company, down about 8% this year and underperforming the gain in a basket of home-builder stocks, added 0.3% in midday trading.

Write to Lisa Beilfuss at [e-mail]

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