Reuters
Economy
UPDATE 2-Pulte profit rises as higher home prices offset slower growth
Thu, Apr 25 14:12 PM EDT

* First-quarter EPS $0.21 vs loss/share $0.03 a year earlier

* Revenue rises 32 pct to $1.16 billion

* New orders rise 4 percent to 5,200 homes

* Average selling price rises 10 percent to $287,000

April 25 (Reuters) - PulteGroup Inc, the No. 2 U.S. homebuilder, reported a better-than-expected quarterly profit as its strategy of selling fewer homes at higher prices paid off.

Pulte, which sells homes under brands including Pulte Homes, Centex and Del Webb, said its average selling price rose 10 percent to $287,000 in the first quarter compared to a year earlier.

Growth in the number of homes booked during the quarter slowed to 4 percent, but the value of new orders rose to $1.58 billion from $1.3 billion a year earlier.

The number of homes booked had increased 27 percent in the three months ended December, and had shown double-digit growth throughout 2012 as the housing market started to recover on lower interest rates and rising rents.

But a shortage of new property ready for home development is forcing Pulte to moderate its sales pace. The number of communities Pulte had at the end of the first quarter fell 14 percent to 650 from a year earlier.

Homebuilders had reined in land purchases during the downturn that began six years ago, and with surging demand, finished lots have become scarce in some markets.

"Accelerating sales pace means that we sell out of neighborhoods sooner and have to look to the next community which may not have been developed yet," Chief Executive Richard Dugas said on a conference call.

Pulte has managed to make the shortage work in its favor by pressing prices higher, said Williams Financial Group analyst David Williams.

"Pulte is trying to protect their land assets better, the quality land assets. They want to keep as many as possible, so that they can keep driving up prices and profitability, this is not unusual."

Williams said he was no longer worried about the demand in the market, and considered pricing a more important indicator than the number of orders.

"I am not as concerned with demand as I am with their ability to be profitable, or to change their fundamentals and take advantage of that demand," he said.

FIRST-QUARTER BEATS

The company reported a net income of $81.8 million, or 21 cents per share, for the first quarter, compared with a loss of $11.7 million, or 3 cents per share, a year earlier. Revenue rose 32 percent to $1.16 billion.

Analysts on average had expected the company to earn 15 cents per share, on revenue of $1.19 billion, according to Thomson Reuters I/B/E/S.

"We saw a consistent growth through the quarter although we purposely tempered down sales activity and controlled price, even more through the quarter. So that influenced our trends a little bit, and we are pleased with the resulting sales pace we've seen so far in April," the CEO added.

The company had an order backlog, an indication of future sales, worth $2.41 billion. Orders are a key indicator for builders who do not recognize revenue until they close on a home.

Pulte shares were trading up 6.4 percent at $20.94, on the New York Stock Exchange on Wednesday midday.


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