Why PulteGroup is optimistic about the spring selling season



PulteGroup reports a big jump in revenues

PulteGroup (PHM) reported fourth-quarter revenues of $1.66 billion, which narrowly missed the Street estimate of $1.67 billion. Sales were up 4.6% on a sequential basis and increased 5.6% on a year-over-year basis. The increase in revenues was driven by a 13% increase in average selling prices, which offset a 4% drop in closings. The increase in average selling prices reflects both price increases and a product mix more skewed towards the move-up buyer.

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Orders declined 18% on a unit basis, to 3,214 net new orders from 3,926 the year before. The dollar value of new orders decreased 8.3% from $1.2 billion to $1.1 billion. As of the end of the year, backlog was 5,772 homes valued at $1.9 billion, compared to a prior year backlog of 6,458 homes valued at more or less the same dollar amount. The average selling price of their backlog increased to $330,000.

Why Pulte is optimistic about the spring selling season

Pulte made some of the same observations that D.R. Horton (DHI) made—the spring selling season has begun a bit earlier than usual. As a general rule, the spring selling season begins around Super Bowl Sunday, but both companies noted stronger-than-normal traffic patterns in January. The homebuilding business is highly seasonal, and Pulte noted that December sales were the same as November’s, though December is almost always weaker than November. This observation, coupled with a good January, is leading both Pulte and Horton to believe that the spring selling season will be strong.

Expansion plans for the future

PulteGroup noted strength in the active adult segment and plans on devoting more resources to that segment. Plus, the company increased its planned land acquisitions to $2 billion for 2014. While first-time homebuyers tend to be an important segment for PulteGroup, they remain underrepresented for the time being, and therefore Pulte is focusing more on other segments—particularly the move-up buyer and the active adult buyer. Finally, Pulte noted a geographic shift. California and the West Coast in general seem to be cooling, while the Midwest and the Northeast are picking up.


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