PulteGroup, Inc. (PHM) reported a net loss of $129 million or 34 cents per share in the third quarter of 2011, improving significantly from a net loss of $995 million or $2.63 per share in the year-ago quarter.
Reported earnings included goodwill impairment charges of $241 million or 63 cents per share, land related charges of $4 million or 1 cent per share and a tax benefit of $73 million or 19 cents per share, while the prior-year quarter earnings included charges of $986 million or $2.60 per share and a tax benefit of $29 million or 8 cents per share.
Excluding these items, the company’s adjusted income in the quarter amounted to $43 million or 11 cents per share compared with the adjusted loss of $56 million or 11 cents per share a year ago. Adjusted income per share was substantially higher than the Zacks Consensus Estimate of break even.
Total revenue increased 7.5% to $1.14 billion from $1.06 billion in the year-ago period. Revenues also exceeded the Zacks Consensus Estimate of $1.05 billion. The improvement in revenues was attributable to better performances by both the company’s operating segments.
Revenues from the Homebuilding segment totaled $1.11 billion, up 7.8% from $1.03 billion a year ago, driven by substantial growth in land sales and moderate growth in home sales. Land sales more than doubled to $12.7 million from $5.9 million in the year-ago quarter while home sales climbed 7.8% to $1.10 billion from $1.02 billion in the prior-year quarter.
Higher home sales during the quarter reflected a 9% increase in closings to 4,198 homes, partially offset by a 1% dip in the average selling price to $262,000. The decrease in average selling price was primarily attributable to a shift in the mix of homes closed during the quarter.
Excluding impairment charges, interest expense and merger-related costs, home sale gross profit improved to $203.4 million from the year-ago gross profit of $171.3 million, reflecting an increase in gross margin from 16.7% to 18.5% in the quarter.
Net new orders during the quarter remained flat year over year at 3,564 homes. Backlog at the end of the quarter declined 3.8% to 5,143 homes ($1.40 billion) from 5,345 homes ($1.45 billion) in the prior year.
Revenues from the Financial Services segment increased 3.3% to $27.9 million from $27.0 million reported in the corresponding quarter of 2010. The mortgage capture rate for the quarter remained unchanged at 78%.
Pulte had cash and cash equivalents of $1.14 billion as of September 30, 2011 compared with $1.47 billion as of December 31, 2010. The company used $163.7 million of cash in operating activities in the first nine months of 2011, while in the year-ago comparable period it generated $798.6 million from operations.
Pulte continues to focus on increased product offerings, cost-reduction initiatives, further margin expansion and sustained overhead leverage. Moreover, the acquisition of Dallas-based Centex Corporation in August 2009 has helped the company to emerge as the nation's largest homebuilder (by units), surpassing D.R. Horton Inc. (DHI).
The combined company caters to 59 markets, including 29 states and the District of Columbia. It also provides access to states like Texas, North Carolina and South Carolina, which have shown comparatively strong new home sales despite the housing slump.
Considering all these, we are maintaining our Outperform recommendation on the shares of PulteGroup over the long term.
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