Pulte Homes sees 'significant increase' in buyer activity at end of 2023

By Tomi Kilgore

Profit for Q4 topped expectations but revenue fell short, as home closings and average prices fell

PulteGroup Inc. said Tuesday it saw a surge in home buying activity around the end of 2023 and projected a bumper 2024, but the home builder's stock took a hit as fourth-quarter revenue dropped below forecasts amid falling home closings and prices.

The company also reported quarterly profit that beat expectations, and announced a $1.5 billion increase to its stock repurchase program, which now represents nearly 8% of Pulte's market capitalization.

The stock (PHM) slumped 0.9% ahead of the open, reversing an earlier premarket gain of as much as 0.9%.

"As the fourth quarter progressed, we experienced a significant increase in buyer activity as interest rates moved lower, resulting in December being the highest sales month of the quarter," said Chief Executive Ryan Marshall.

"After multiple years of variable macroeconomic activity, expectations are that 2024 can be a year of increased homebuying demand given a strong job market, lower interest rates and a limited inventory of existing homes," Marshall added.

Net income declined to $711 million, or $3.28 a share, from $882.2 million, or $3.85 a share, in the same period a year ago. That beat the FactSet consensus for earnings per share of $3.21.

Revenue declined 15.5% to $4.29 billion, missing the FactSet consensus of $4.47 billion.

The number of home closings dropped 13.9% to 7,615, below the FactSet consensus of 8,026, and the average sales price of homes closed fell 2.5%, to $574,000 from $561,000.

Meanwhile, net new orders jumped 57% to 6,214 homes, well above expectations of 5,584, amid an improved selling environment and a decrease in cancellations.

Separately, the company said it spent $300 million to buy back 3.6 million of its common shares during the fourth quarter, and spent $1 billion to buy back 13.8 million shares in 2023.

Pulte also said it boosted its stock repurchase program by $1.5 billion, to lift the total repurchase authorization to $1.8 billion. That represents 7.9% of the company's market cap of $22.87 billion as of Monday's close.

"This latest authorization reflects our expectation for continued strong cash flow from operations and our longstanding commitment to returning excess funds to our shareholders," CEO Marshall said.

Pulte's stock has soared 46.8% over the past three months through Monday, while the iShares U.S. Home Construction ETF ITB has run up 39% and the S&P 500 index SPX has advanced 18.3%>

-Tomi Kilgore

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01-30-24 0853ET

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