PulteGroup earnings: Homebuilder's stock pops after quarterly results top estimates

PulteGroup, Inc. (PHM) stock popped Tuesday after the homebuilder reported quarterly results that exceeded expectations as buyers reentered the housing market.

“Within an evolving macro environment, consumers across all buyer segments and price points continue to demonstrate a strong desire for homeownership,” PulteGroup President and CEO Ryan Marshall wrote in the press release.

Earnings per share for the homebuilder's fiscal first quarter came in at $2.35, beating the $1.80 expected by analysts, according to data compiled by Bloomberg. Revenue for the quarter totaled $3.5 billion, more than the $3.28 billion expected by analysts.

Shares of the company gained as much as 3% following the results. The stock was trading at $65.29, up 2.24% in afternoon trading. By comparison, the S&P 500 index was down 1.41%.

'General sense of stability in rates'

While PulteGroup's purchase contracts slipped 8% to 7,354 homes during the quarter, that decline was better than expected with analysts estimating only 5,890 purchase contracts during the quarter.

“Home sales are benefiting from recent declines in mortgage rates, but I also think just having a general sense of stability in rates is important to consumer confidence,” Marshall told analysts on the earnings call Tuesday.

First-time homebuyers were the large part of the homebuilder's success in the quarter. Net new orders to first-time buyers jumped 18% year over year, while move-up orders declined by 20% and active adult orders dropped by 22%.

While canceled contracts came in at 13% during the quarter, up from 4% in the same period last year, these were less than 200 basis points higher than the fourth quarter.

"So cancellations are beginning to stabilize," Pulte CFO Robert O’Shaughnessy said in the earnings call.

“Given improvements in demand conditions, in the broader interest rate environment, as well as a generally limited inventory of existing homes, we are starting to see the pressure on selling prices ease in many of our markets,” Marshall added.