PulteGroup (PHM +2%) is trading at a ten-year high after the company reported encouraging third quarter results this morning.
Pulte may have missed sales estimates due to the hurricanes that struck Houston and the Southeast, but the market is looking past those disruptions because the outlook for the housing market remains strong.
Management was extremely pleased with third quarter results -- buyer demand was robust during quarter.
Despite the hurricanes that affected the company's homebuilding operations in September, adjusted earnings grew 40% to $0.60/share with revenue up 9% to $2.1 billion.
Net new orders for the third quarter increased 11% to 5,300 homes, while the value of new orders increased 23% over the prior year to $2.3 billion.
No homes under construction saw significant damage, but closing and reopening 1175 communities resulted in lost construction days and traffic slowed in the aftermath.
Importantly, management said customer traffic rebounded in September and in to October. Ending backlog for the quarter was up 15% over the prior year to 10,823 homes, as backlog value gained 26% to $4.7 billion, a ten-year high.
Higher labor and materials costs are pressuring margins but the company was able to reaffirm operating margin guidance for the year.
Pulte sees continued support for housing demand, which felt stronger than government data suggests.
Note that September New Home Sales are out tomorrow morning at 10:00 (Briefing.com Consensus -1% Q/Q to a 555K seasonally adjusted annual rate) and Existing Home sales are out on Thursday morning.
PHM is now trading at almost 2x book value, which is not ‘cheap'. LGI Homes (LGIH) trades at ~3x book, DR Horton (DHI) trades at 2.2x, while Lennar (LEN) is also close to 2x book value. The sector trades at an average of ~1.6x book value.
Pulte, Meritage (MTH), Beazer (BZH) and Cal-Atlantic (CAA) all hit multi-year highs today.