Pulte pares 1Q loss and now expects profit in 2010
LOS ANGELES -- PulteGroup Inc., the nation's largest homebuilder, said Wednesday it slashed its loss in the first quarter and forecast it would be profitable this year.
That would mark a major turning point for the company, which has posted a loss now for 14 consecutive quarters as the worst housing downturn in decades unfolded.
But management struck a confident tone Wednesday, saying it expects improved sales and fewer profit-destroying write-downs this year.
Assuming the housing industry remains stable, the company will remain profitable this year, said PulteGroup CEO Richard Dugas. He credited a more stable backlog of home orders and additional savings from its takeover of rival Centex Corp. last year.
"The expected benefits from last year's merger with Centex are clearly evident in the numbers," Dugas said. The combine company now has operations in 29 states and its Del Webb brand is the nation's largest builder of communities for adults age 55 and over.
Still, Dugas cautioned that a housing turnaround remains hampered by high unemployment, the end of homebuyer tax credits and more foreclosed homes hitting the market.
Many industry experts say the housing recovery could sputter in the second half of the year.
This spring, however, builders have seen orders improve as affordable prices, low mortgage rates and two federal tax credits lured homebuyers into the market.
Sales of new homes surged 27 percent in March, the first jump in four months and the strongest month since last July. Homebuilders Beazer Homes USA Inc. and D.R. Horton Inc. both reported an increase in net income and a bump in sales for their most-recently completed quarter.
PulteGroup said completed sales jumped 77 percent from a year ago while orders rose 43 percent. The builder also almost eliminated charges related to write-downs on land and other assets to $8 million from $410 million in the prior-year quarter.
The company, based in Bloomfield Hills, Mich., posted a loss of $12.5 million, or 3 cents a share. That compares with a loss of $514.8 million, or $2.02 per share, a year earlier. Revenue rose 75 percent, to $1.02 billion. The latest quarter includes results from Centex.
Analysts polled by Thomson Reuters expected a loss of 22 cents a share and $1.18 billion in revenue.
The latest results appeared to fall short of investors' expectations, however. Shares in PulteGroup slipped 49 cents, or almost 4 percent, to $12.61 in afternoon trading.
Some analysts pinned the stock drop on disappointing orders.
The builder had fewer than 5 new orders per community in the quarter, and that was below most other builders, Credit Suisse analyst Daniel Oppenheim wrote in a research note.
PulteGroup builds homes to order. That approach can mean fewer sales if buyers can't afford to wait. And that's the mindset many buyers have been in lately as they raced to buy before the end of April to qualify for a tax credit.
Oppenheim noted PulteGroup may need to step up incentives to compete with rivals with lots of inventory.
"We see risk Pulte may need to respond to more volume-focused builders via matching incentives or prices, especially given the likely slower demand over the next several months," the analyst wrote.
It ended the quarter with $2.6 billion in cash, but management is keeping tightlipped on whether it plans to buy back shares or invest the money in its business.
"We are now evaluating many alternatives for our cash," Dugas said, "and we do not intend to let it just sit there forever."
Copyright 2010 The Associ