NEW YORK (TheStreet) -- PulteGroup Inc. (PHM) was rising 2.4% to $20.27 in midday trading Friday after MKM Partners raised its target price on the stock.
MKM Partners raised its target price on the stock to $21 from $19. The company currently holds a Neutral rating with the firm.
Interestingly, JPMorgan actually downgraded the stock to Underweight from Neutral "based on the stock's expensive relative valuation, as well as our outlook for less meaningful gross margin expansion and below average order growth in 2014." The report goes on to state:
"Longer term, we believe the company's strategy featuring more efficient asset utilization and a great degree of capital allocation discipline should serve the company well and potentially result in higher levels of profitability and return on capital. However, as our Dec. 2014 price target of $18.00, which we note is based on a roughly 9x multiple against our 2016E EPS of $2.24 discounted back 1.5 years, represents 9% downside potential from current levels, well below our universe average upside potential of 10%, we rate PHM Underweight given our outlook for relative underperformance within the sector."
TheStreet Ratings team rates PULTEGROUP INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate PULTEGROUP INC (PHM) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, robust revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- PULTEGROUP INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PULTEGROUP INC turned its bottom line around by earning $0.53 versus -$0.55 in the prior year. This year, the market expects an improvement in earnings ($6.61 versus $0.53).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Household Durables industry. The net income increased by 1856.5% when compared to the same quarter one year prior, rising from $116.63 million to $2,281.88 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 29.7%. Since the same quarter one year prior, revenues rose by 21.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Household Durables industry and the overall market, PULTEGROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: PHM Ratings Report