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Investing.com - BofA Securities has raised its price target on PulteGroup (NYSE:PHM) to $140.00 from $127.00 while maintaining a Buy rating on the homebuilder’s stock. According to InvestingPro analysis, the stock appears to be trading below its Fair Value, with strong financial metrics supporting potential upside.
The price target increase follows PulteGroup’s second-quarter gross margin of 27.0%, which exceeded BofA’s forecast by 50 basis points despite being down 50 basis points quarter-over-quarter. The company achieved this performance through favorable closings mix that offset higher incentives, which rose to 8.7% of sales from 8% in the previous quarter. InvestingPro data shows the company maintains a healthy trailing twelve-month gross margin of 28.6% and operates with moderate debt levels, demonstrating strong financial management.
PulteGroup reiterated its third and fourth quarter gross margin outlook of 26.5%-27%, which BofA believes exceeds investor expectations. The company’s guidance assumes incentives will remain elevated and inflation related to tariffs will not impact material costs until 2026, rather than the second half of 2025 as previously expected.
BofA expects mix to be a margin tailwind in 2026 as PulteGroup delivers more higher-margin active adult homes from recently opened Del Webb communities. Active adult homes represented 20% of closings but 24% of orders in the second quarter.
The investment bank noted PulteGroup is well-positioned for the current soft demand environment, having lowered its land spend to $5 billion from $5.5 billion in the first quarter, slowed its starts pace by 11% year-over-year, and reduced spec inventory by 3% quarter-over-quarter and 13% year-over-year to 47% of production. InvestingPro analysis reveals the company’s strong financial position with a current ratio of 6.3, while management has been actively buying back shares and maintaining 13 consecutive years of dividend payments. For detailed insights and more exclusive ProTips about PulteGroup, subscribers can access the comprehensive Pro Research Report.
In other recent news, PulteGroup reported stronger-than-expected earnings for the second quarter of 2025, with earnings per share reaching $3.03, surpassing the forecast of $2.95. The company’s revenue also slightly exceeded expectations, totaling $4.4 billion compared to the projected $4.38 billion. Following these results, UBS raised its price target for PulteGroup to $150 from $141, maintaining a Buy rating on the stock. Additionally, Seaport Global Securities upgraded PulteGroup from Neutral to Buy, setting a price target of $155. This upgrade was attributed to stabilizing fundamentals and a more favorable investment case, as indicated by the second-quarter guidance. The recent developments reflect positive market sentiment and a strengthening position for PulteGroup in the industry.
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