PulteGroup Returns To Profitability

PulteGroup swings to a quarterly profit buoyed by its 2009 merger with Centex and federal tax credits for American homebuyers.
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BLOOMFIELD HILLS, Mich. (

TheStreet

) --

PulteGroup

(PHM) - Get Report

posted a quarterly profit for the first time in 14 quarters, the homebuilder said Wednesday, buoyed by its 2009 merger with Centex and federal tax credits for American homebuyers.

PulteGroup

earned $76.3 million

, or 20 cents per share, compared with year-earlier losses of $189.5 million, or 74 cents per share. Results easily topped Wall Street's expectations.

"For the industry to experience meaningful and sustained rebound we need a stronger economy, job creation and better consumer confidence," Chief Executive Richard Dugas cautioned analysts on a conference call. "Right now the industry's biggest issue is a lack of buyers."

PulteGroup shares were up throughout much of Wednesday's session, but the rally proved unsustainable after Dugas' cautionary remarks and a forecast from Credit Suisse analyst Dan Oppenheim for a 13% decline in PulteGroup's orders in the third quarter. Shares slipped in the final hours of trading, closing down 0.6% to $8.38.

The

iShares Dow Jones US Home Construction

(ITB) - Get Report

, an exchange-traded fund that tracks the homebuilding sector and counts PulteGroup and rival

D.R. Horton

(DHI) - Get Report

shares among its top three holdings, was lower by 0.3%. The ITB's top holding,

NVR

(NVR) - Get Report

, edged down 0.1%.

PulteGroup said revenue soared 93% year-over-year to $1.31 billion, reflecting a doubling in closing volumes to 5,030 homes, partially offset by a 4% decrease in the company's average selling price to $251,000.

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D.R. Horton said Tuesday it too

returned to year-over-year profitability

in the recent quarter, with the number of closed sales growing by 60% to 6,805 homes. Revenue grew 51% to $1.38 billion.

Home sale closing volumes for both firms were fueled by consumers rushing to take advantage of federal tax credits that offered as much as $8,000 for first-time home buyers. The still-struggling housing market saw sales ramp up in March and April since buyers had to have signed a contract by the end of April and initially had until the end of June to complete the deal. Lawmakers later extended the deadline to close on a home purchase and still qualify for the tax credit to Sept. 30.

PulteGroup completed its $1.3 billion acquisition of Centex in August 2009 in a move that created the largest homebuilder in the U.S. and bolstered its roster of homes catering to first-time homebuyers.

Orders rose 25% to 4,218 in the quarter, PulteGroup said, while D.R. Horton said its new home orders fell sharply in May after the tax credits expired, but improved modestly in June and July. Homebuilder

Ryland Group

(RYL)

also reported a drop in orders during its second quarter.

Sales of newly built homes rose 23.6% in June

to a seasonally adjusted rate of 330,000, the Commerce Department said last month. The figure came in ahead of expectations after a revised record-low rate of 267,000 units sold in May.

While any increase in the rate of home sales is seen as a good sign for the economy, homebuilders and the housing market in general, the uptick in June home sales still represented the second-weakest month on record after May's depressed figures. It was also 76.3% lower than the 1.4 million-peak in July 2005, at the height of the housing bubble.

>> Home Prices Weaken, Sales Rise

"Recent buyer demand has been stable, albeit at very low levels, after the pullback experienced following expiration of the federal tax credit at the end of April," said Dugas. "While reasonable to expect a modest seasonal pick up in the second half of 2010, long term we believe that any significant housing recovery will require a stronger economy, higher employment and greater overall consumer confidence."

PulteGroup's recent quarter included about $45 million in land and mortgage-related charges, and an income tax benefit of $82 million.

-- Reported by Miriam Marcus Reimer from New York.

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