PulteGroup (PHM) Stock Upgraded to 'Overweight' After Q2 Earnings

PulteGroup (PHM) stock received a ratings upgrade at JPMorgan given expectations for strong earnings growth and return on equity.
By Rachel Graf ,

NEW YORK (TheStreet) -- PulteGroup (PHM) - Get Report  stock was upgraded to "overweight" from "neutral" at JPMorgan after reporting a 2016 second-quarter earnings and revenue beat on Thursday.

The firm hiked its price target to $26 from $18 on shares of the Atlanta-based home builder. 

The next phase of PulteGroup's value creation strategy, which includes a $1 billion share repurchase program, should drive above-average growth in per-share earnings in 2017 and a return on equity (ROE) near or toward the top of its larger-cap peers, JPMorgan said.

The firm estimates per-share earnings growth of 28% in 2017 and ROE of 15.2%.

"We expect a positive reaction by the stock today, driven not only by the company's modest EPS beat versus the street, but in addition, and more importantly, we view the company's material share repurchase announcement along with its goal to further reduce SG&A as solid positives for the stock over the medium to longer term," JPMorgan observed, noting that the new board members and "apparent support" of the next phase of its value-creation plan are positives as well. 

Shares are flat in pre-market trading after closing at $21.51 on Thursday.

Separately, TheStreet Ratings team rates the stock as a "buy" with a ratings score of B.

PulteGroup's strengths such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, attractive valuation levels and increase in net income outweigh the fact that the company shows weak operating cash flow.

You can view the full analysis from the report here: PHM

TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author. 

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