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On Friday, BTIG analyst Carl Reichardt Jr. revised the price target on PulteGroup (NYSE:PHM) stock to $145.00, down from the previous $156.00, while maintaining a Buy rating on the shares. The adjustment follows PulteGroup’s fourth-quarter earnings report, which surpassed expectations primarily due to a significant insurance benefit. According to InvestingPro data, PulteGroup maintains strong financial health with a "GREAT" overall score and impressive return on equity of 27%.
PulteGroup reported earnings per share (EPS) of $4.43 for the fourth quarter of 2024, which was above BTIG’s estimate of $3.52 and the consensus estimate of $3.24. The results included a $255 million insurance benefit, equating to $0.93 per share, which when excluded, adjusted the EPS to $3.50. This adjustment brings the selling, general and administrative expenses (SG&A) to sales ratio to 9.6%, slightly higher than the analyst’s projection.
The company’s higher average selling price (ASP) and a lower tax rate than forecasted contributed positively to the results. However, these were offset by lower than expected home deliveries. PulteGroup’s unit orders saw a modest decline of 1% year-over-year, which was slightly better than BTIG’s estimate of a 2% decrease.
Reichardt highlighted the early signs of positive seasonal order activity for PulteGroup leading up to the spring selling season. He also noted that while the company might reduce entry-level speculative inventory, which could impact margins, the move-up and active adult segments showed positive sales absorption in the fourth quarter and are expected to demonstrate demand strength and margin resilience.
Due to a more conservative operating margin outlook, BTIG has lowered its earnings estimates for PulteGroup. The firm’s forecast for fiscal year 2025 is now set at $12.60 per share, down from the previous $14.50, and for fiscal year 2026, the estimate is reduced to $14.45 per share from $16.25. Despite the reduced price target and earnings estimates, BTIG continues to see a return on equity (ROE) of over 21% for PulteGroup and believes there is still upside potential for the stock. InvestingPro’s Fair Value analysis suggests PulteGroup is currently undervalued, with the company showing strong revenue growth of 11.74% and impressive dividend growth of 37.5% over the past year.
In other recent news, PulteGroup, Inc. reported robust fourth-quarter earnings, surpassing analyst expectations with an adjusted earnings per share of $4.43, significantly higher than the projected $3.27. The company’s revenue also exceeded expectations, reaching $4.92 billion against the anticipated $4.65 billion. This strong performance was propelled by a 13% increase in home sale revenues, with the company closing on 8,103 homes during the quarter, marking a 6% year-over-year increase. The average selling price also saw a rise of 6% to $581,000.
Despite the challenges posed by elevated mortgage rates, CEO Ryan Marshall stated the company is well-positioned for the upcoming spring selling season due to operational changes and targeted sales incentives. PulteGroup’s home sale gross margin for Q4 was reported at 27.5%, a slight decrease from 28.9% the previous year.
In further developments, the company repurchased $320 million of common shares during the quarter and received approval for a $1.5 billion increase to its share repurchase authorization. These are recent developments that highlight PulteGroup’s strong financial performance amidst a challenging housing market environment.
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