PulteGroup Earnings Fell as Orders Accelerated
Net orders rose 6% to 7,536, extending a two-quarter recovery in demand.
PulteGroup Inc. (PHM), the home builder, reported an 18% decline in second-quarter diluted earnings to $2.48 a share as lower closings and selling prices weighed on results. Net income fell 22% to $472 million.
The quarter extended a sharp revenue contraction, though the decline eased slightly from the start of the year. Home-sale revenue fell 11% from a year earlier, compared with a 12% decrease in the first quarter and declines of 5% or less in each of the preceding three quarters.
Home-sale revenue totaled $3.8 billion as closings declined 8% to 6,997 and the average selling price fell 3% to $544,000. The price decline moderated from 5% in the first quarter, while the drop in closings widened from 7%. Home-sale gross margin rose sequentially for the first time in five quarters, increasing 0.6 percentage point to 25.0%, though it remained two percentage points below the year-earlier level.
Orders moved in the opposite direction. Net orders increased 6% to 7,536, accelerating from gains of 3% in the first quarter and 4% in the fourth quarter after two quarters of declines. Order value rose 5% to $4.1 billion, trailing unit growth as value per order edged lower.
PulteGroup expanded its average community count 8% to 1,074, a faster pace than order growth. Communities increased sequentially from 1,043 even as orders declined from 8,034. Backlog rose 2% to 10,966 homes, while its value slipped 1% to $6.8 billion, also pointing to a lower value per home.
Florida accounted for roughly three-quarters of the year-over-year increase in orders, adding 342 units to reach 2,115. Closing weakness was broader: Northeast closings fell 27% and West closings dropped 20%, while Florida was nearly unchanged.
Selling, general and administrative expense declined to $383 million from $390 million, though it increased as a share of home-sale revenue to 10.1% from 9.1%. That ratio improved from 11.5% in the first quarter. Financial-services pretax income fell 13% to $37 million, with mortgage capture holding near 85%, and nearly tripled from the first quarter.
PulteGroup repurchased $373 million of stock during the quarter, up from $308 million in the first quarter and $300 million a year earlier. The spending came as first-half operating cash flow fell 58% to $177 million and cash declined to $1.38 billion from $2.01 billion at year-end. Debt-to-capital increased to 12.3% from 11.2%, leaving the company with higher leverage as it carried a larger backlog into the second half.