Pulte Group (PHM) is down 4% after the company reported in-line headline fourth quarter results this morning.
Home sale revenues for the fourth quarter increased 12% over the prior year to $2.7 billion. Higher revenues for the period were driven by a 7% increase in closings to 6,632 homes, combined with a 5%, or $19,000, increase in average sales price to $410,000.
Adjusted net income for the period was $253 million, or $0.85 per share, after excluding a $66 million pre-tax benefit associated with insurance related adjustments, a $57 million pre-tax charge relating to land adjustments, and $181 million of income tax charges primarily relating to the revaluation of the Company's deferred tax assets following newly enacted federal tax legislation.
The Company's fourth quarter adjusted home sale gross margin, which excludes the $57 million land charge, was 23.8%, down 110 basis points from last year.
The value of fourth quarter net new orders increased 22% over the prior year to $2.0 billion, while the number of orders increased 14% to 4,805 homes. This leading indicator was very strong, marking an acceleration from 23% and 11% in the third quarter, respectively.
Backlog value at the end of the fourth quarter was $4.0 billion, which is up 35% over the prior year and is the Company's highest year-end backlog in over a decade. On a unit basis, backlog for the quarter was up 21% over last year to 8,996 homes. The average price of homes in backlog increased 12% over the prior year to $442,000.
Chief Executive Ryan Marshall: "Ongoing gains in profitability and cash flow generation, which allowed us to reinvest in our business while repurchasing 11% of our outstanding common shares in 2017, also gave our Board the confidence to announce today a $500 million increase to our share repurchase plan. Given expectations for further expansion in the economy, along with ongoing gains in employment and buyer demand, we remain highly constructive on the industry. With our large backlog and robust land pipeline, we are well positioned to continue growing our business and building even greater value for our shareholders."
On the conference call, management called for 2018 closings up 5-10% to 22-23K homes, average selling prices up ~3% to $400-415K and gross margin slightly lower at 23.0-23.5% from 23.6% adjusted last year.
PHM is trading at a two-month low after the stock broke through its 50-day moving average for the first time in six months yesterday.
The group has been weak since December New Home Sales came in below estimates on Thursday of last week. The 10-year Treasury yield breaking out to a four-year high may also be weighing on the space. Homebuilder management usually allays concerns about higher rates dampening demand for new homes.
Homebuilders were due for a pullback as the ETF (ITB) rose 60% in 2017.
The largest US homebuilder DR Horton (DHI) will report tomorrow morning. M/I Homes (MHO) and Meritage (MTH) will report on Thursday morning.