Pulte (PHM) May Be Turning The Corner
Stock Market Investing Advice, Stock Market Investing Strategies, Various Investment Information
Residential homebuilder Pulte (PHM) appears to have taken some positive steps towards consolidating its financial recovery, having announced better than expected results for the first 3 months of the financial year. Given the current economic climate a loss was always on the cards for the construction giant but the $12 million negative from the first quarter was a huge improvement on the $515 million figure reported at this time last year and Richard J Dugas Jr., who is the company’s Chief Executive Officer, predicts that they will be back to making profits again later this year, with Pulte (PHM) becoming profitable purely on a gross basis in the last quarter.
The reason for the turn around is two-fold, with both a healthy 43% increase in orders and a 3% drop in the rate of cancelled orders playing their part. The company revenue reflects the changing picture with a massive 75% increase taking it to a very healthy $1 billion, a figure which will be the envy of many competitor companies. The bald figures show that Pulte reported a 1.4. figure on the ratio which measures debt to equity, having $2.6 billion of equity and a debt amounting to $4.3 billion.
While rival companies such as Beazer (BZH), KB Home (KBH) and Toll Brother (TLL) continue to toil in the stock market Pulte (PHM) has seen its rating improve on the back of these results and the majority of analysts now view it a stock worth holding onto with a lesser amount recommending to buy and some sticking to the ‘sell’ rating which has become prevalent in the construction industry in recent times. In 2009 Pulte became the largest builder of family homes in the country after the completing the purchase of Centex and these recent figures suggest that the bold take over move may be beginning to reap benefits earlier than anyone had expected and which may prove to be the base for moving forward in a healthy financial position.
A jump in the number of applications for mortgages, up almost 4% in the last week, shows a growing demand for housing which builders like Pulte (PHM) will be hoping to cash in on as confidence in the housing market helps put them back on their feet and starting out on the road to recovery. If forecasts are borne out then the number of house buyers will continue to increase in the months to come. Despite this much needed optimism there are still reasons to avoid becoming overly positive, with the levels of unemployment and consumer confidence still causing a great deal of concern.
Another factor which restricts the confidence felt by new home builders like Pulte (PHM) is the amount of properties which have been foreclosed and which are now flooding the market Added to the running out of the tax credits granted by the government to homebuyers and we can see that there are still challenging times ahead for the construction industry. The significant increase in Pulte’s (PHM) reported equity levels should give them a better position from which to confront these issues than many of their rivals.
