Key points from PulteGroup's 4Q and full-year 2013 earnings report

Part 4
Key points from PulteGroup's 4Q and full-year 2013 earnings report (Part 4 of 5)

Pulte increases earnings per share as costs remain under control

Pulte has been steadily increasing its earnings per share

Pulte reported net income of $220 million, or $0.57 a share, which handily beat the Street estimate of $0.45 a share. The company earned $0.15 in the fourth quarter of 2012 and $0.45 in the third quarter. Given that builders generally have a letdown in the fourth quarter, these are good numbers indeed.

Pulte EPSEnlarge Graph

Earnings per share were driven by the big increase in average selling prices as well as control of selling, general, and administrative expenses (SG&A). SG&A increased about $54 million, but as a percentage of revenues, it fell 30 basis points.

Also influencing earnings per share was the company’s buyback program, through which it repurchased a total of $35 million worth of stock. Leverage was reduced.

Chairman and chief executive officer Richard Dugas Jr. had this to say regarding the quarter:

  • “The material improvement in our key operating and financial metrics has allowed us to reduce our leverage and build a cash balance of $1.7 billion. Given the operating and financial disciplines we have established within the organization, we are confidently increasing our investment in land related spend, while still retaining the flexibility to allocate capital to reduce debt, pay dividends and/or repurchase stock, as we deem appropriate.”

Geographical shift seems to be occurring

The company noted that activity seemed to be shifting geographically, in that the previously red-hot West Coast markets were beginning to cool, while the lagging markets—particularly the East Coast and the Midwest—were beginning to pick up. Pulte believes the government shutdown in DC hurt fourth quarter sales on the East Coast, and that we won’t see a repeat of the shutdown. Texas is weaker, and New Mexico and Arizona are cooling as well. Florida and the Southeast are doing well. Overall, this could mean investors will want to shift out of West Coast–centric builders like Standard Pacific (SPF) and KB Home (KBH) into more diversified builders like Pulte (PHM) and D.R. Horton (DHI).

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