PulteGroup (PHM) Stock Benefits From Lennar's Quarterly Earnings Beat

NEW YORK (TheStreet) -- PulteGroup (PHM) shares are up 1.18% to $20.55 in trading on Wednesday as the home building industry continues its run of good news after Lennar (LEN) reported strong quarterly profits before the opening bell today.

Lennar, the country's second largest home builder, reported that new home orders rose 18% year over year in the second quarter as the company earned $183 million, or 79 cents per share, while generating $2.39 billion in revenue.

Analysts on average were expecting the company to earn 64 cents per share on revenue of $2.02 billion.

Lennar's results follow Monday's report that total existing home sales rose 5.1% in May to a seasonally adjusted annual rate of 5.35 million homes, according to the National Association of Realtors.

Year over year sales have increased for eight consecutive months.

Lennar shares are up 3.63% to $50.78 in trading today.

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 some important positives, 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 revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.6%. Since the same quarter one year prior, revenues slightly increased by 1.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels.
  • PULTEGROUP INC's earnings per share declined by 21.1% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, PULTEGROUP INC reported lower earnings of $1.25 versus $6.74 in the prior year. This year, the market expects an improvement in earnings ($1.30 versus $1.25).
  • In its most recent trading session, PHM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: PHM Ratings Report

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