PulteGroup, Inc. (NYSE: PHM) reported stronger-than-expected Q4 results, topping both earnings and revenue estimates. The robust results were driven by strong gains in home closings as well as revenues, gross margin, and overhead leverage.
Shares of the 3rd largest home construction company in the United States based on the number of homes closed, gained 1% to close at $53.19 on February 2.
Q4 Performance
Notably, adjusted earnings of $2.51 per share grew 64% year-over-year and beat analysts’ expectations of $2.33 per share. The company reported earnings of $1.53 per share for the prior-year period.
Furthermore, revenues jumped 36.7% year-over-year to $4.36 billion and exceeded consensus estimates of $4.26 billion.
The increase in revenues reflects a surge in home sale revenues, which increased 38% to $4.2 billion driven by a 26% increase in closings to 8,611 homes, as well as a 10% increase in average sales price to $490,000.
Increased Share Repurchases to $1B
Concurrent with the earnings announcement, the PulteGroup Board of Directors approved an increase in the company’s share repurchase authorization to $1.0 billion backed by strong cash flows.
During the fourth quarter, the company repurchased 5.6 million shares at an average price of $50.11 per share for $283 million.
PulteGroup CEO, Ryan Marshall, stated, “Increasing our repurchase authorization by $1.0 billion aligns with our defined capital allocation priorities that include investing in our business, paying a dividend;, repurchasing shares and maintaining a modest leverage profile.”
CEO Comments
CEO Ryan Marshall said, “Given the country’s resilient economy, outstanding job market, rising wages and an ongoing desire for home ownership, we anticipate the strong buyer demand we realized in 2021 to continue in the year ahead.”
He further added, “Although ongoing supply chain disruptions continue to challenge our industry, we believe that our size, growing community count and an available inventory of new homes have us well positioned to grow our business in 2022 while continuing to deliver exceptional returns.”
Wall Street’s Take
Following the upbeat Q4 results, Wedbush analyst Jay McCanless increased the price target on PulteGroup to $68 (27.8% upside potential) from $64, and reiterated a Hold rating.
The price target hike was driven by impressive orders and housing gross margin well ahead of the analyst’s forecasts.
McCanless added, “Pulte raised prices in all markets during F4Q21 while capping sales in approximately 50% of communities in F4Q21. January’s activity levels apparently improved versus the consistent demand seen through F4Q21. Management did not quantify the change, but it sounded like the spring season started early this year similar to 2021.”
The Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 3 Buys, 3 Holds and 1 Sell. The average PulteGroup stock forecast of $61.29 implies 15.2% upside potential to current levels.
Bloggers Weigh In
TipRanks data shows that financial blogger opinions are 100% Bullish on PHM stock, compared to a sector average of 73%.
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