PulteGroup (PHM) Tops Q2 EPS by 28c, Revenues Beat
PulteGroup (NYSE: PHM) reported Q2 EPS of $1.15, $0.28 better than the analyst estimate of $0.87. Revenue for the quarter came in at $2.59 billion versus the consensus estimate of $2.51 billion.
- Net Income of $1.29 Per Share
- Adjusted Net Income of $1.15 Per Share
- Home Sale Revenues Increased 3% to $2.5 Billion
- Homebuilding Gross Margin Increased 80 Basis Points to 23.9%
- Backlog of 13,214 Homes Up 12%; Backlog Value Up 13% to $5.8 Billion
- Net New Orders Decreased 4% to 6,522 Homes
- Cash of $1.7 Billion After Repaying $700 Million on its Revolving Credit Facility
- Company Provides Update on the Impacts of COVID-19
“Following a period of demand weakness beginning in late March and into April as COVID-19 first impacted the country, new home sales experienced a material acceleration as the second quarter progressed,” said Ryan Marshall, President and Chief Executive Officer of PulteGroup. “The recovery in demand reflects a number of factors, including: low interest rates, a restricted supply of existing-home inventory, pent-up demand following the economic shutdown, the appeal of single-family living in a new home and a desire among some buyers to exit more densely populated urban centers.”
“By effectively adjusting our business practices to the rapidly changing market dynamics caused by COVID-19, PulteGroup realized a 34% increase in adjusted earnings per share and generated strong cash flows in the current quarter. With industry leading gross margins, a backlog valued at $5.8 billion and $1.7 billion of cash on hand, the Company is well positioned to navigate current market conditions.”
COVID-19 Update
In conjunction with announcing its second quarter financial results, the Company also provided the following update on the impact of the COVID-19 pandemic on housing demand and its overall operations:
“After a period during which we elected to close our sales centers and leverage multiple technologies to sell remotely, all of our communities are now reopened to walk-in traffic with sales staff working on-site,” said Mr. Marshall. “Our Financial Services teams also adapted their business practices to operate remotely and continue to do so currently. Our construction and manufacturing operations were deemed essential services in all but a handful of markets, so we incurred only limited production disruptions in the second quarter and are now operating at effectively full capacity in all markets. In response to the ongoing risks relating to the pandemic, all of our teams are working under enhanced safety protocols designed to protect the health of our employees, customers and trade partners.”
“PulteGroup was in a strong financial position at the start of this health crisis, but given the risks of severe economic impact we moved quickly to protect our overall liquidity and financial flexibility. Our actions included: reducing controllable expenditures, tightly managing investment in the business, drawing $700 million on our revolver, and suspending share repurchase activity. These actions, coupled with the improving operations we experienced through the quarter, resulted in strong free cash flow generation in the quarter. As a result, our cash balance at the end of the second quarter was $1.7 billion, after having repaid the $700 million we borrowed under our revolver.”
“New home demand has clearly rebounded, but we continue to take a disciplined approach to our business given the ongoing spread of the coronavirus. As a result, we are gradually increasing our land acquisition and development spend to help ensure future lot availability. We are also increasing our start cadence and related investment in house inventory, while continuing to expand our offering of first-time buyer product to meet the growing demand for more affordably priced homes. We have also recalled the majority of furloughed employees and may rehire additional staff as the recovery continues to unfold.”
“Given the strength of second quarter sales, we are encouraged about the back half of 2020 and plan to provide guidance for the remainder of the year as part of our second quarter earnings call.”
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