PulteGroup Posts Surprise Profit Drop on Soft Orders

By Lisa Beilfuss 

Home builder PulteGroup Inc.'s first-quarter profit dropped 26%, as closings fell and orders were soft.

Climbing consumer confidence, low mortgage rates and low inventory have helped spur new home sales over the quarter. The annual sales pace hit a seven-year high in the most recent report from the U.S. Census Bureau, while the National Association of Realtors reported a 7.8% surge in new home prices in March from a year earlier.

But while Chief Executive Richard Dugas acknowledged improving demand conditions, orders rose just 6% over the quarter at PulteGroup versus 30% at rival D.R. Horton.

Pulte was hit by a higher-than-anticipated income tax expense, acquisition accounting and construction delays that slowed closings, Mr. Dugas said.

Shares in Pulte, up 15% over the past 12 months through Wednesday's close, were down 7.8% in recent premarket trading to $20.01.

The Atlanta-based home builder, one of the nation's largest, said closings slid 2% to 3,365 homes. Net new orders rose 6% to 5,139 homes, and the value of net new orders also rose 6% to $1.7 billion. Backlog totaled $2.6 billion, up from $2.4 billion a year earlier.

While promotions have been pressuring some builders' margins, Pulte's margin has held up and incentive levels remain low. In its latest quarter, home-building cost of revenue increased 1.5%. The company's gross margin fell to 22.7% from 23.8%.

For the quarter ended March 31, Pulte booked profit of $55 million, or 15 cents a share, down from $74.8 million, or 19 cents a share, a year earlier.

Revenue rose 1.3% to $1.13 billion.

Analysts surveyed by Thomson Reuters projected 20 cents in per-share profit and $1.24 billion in revenue.

Write to Lisa Beilfuss at [e-mail]

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