PulteGroup, Inc. (PHM) reported a profit of $76 million or 20 cents per share in the second quarter of the year, compared to a loss of $189 million or 74 cents per share in the same quarter of 2009.

The company significantly topped the Zacks Consensus Estimate for a loss of a penny per share. The improvement in income was due to stabilization in demand for new homes.

Consolidated revenues in the quarter almost doubled to $1.31 billion from $678.6 million a year ago. It was higher than the Zacks Consensus Estimate of $1.24 billion.

Revenues in the Homebuilding segment jumped 93% to $1.27 billion, reflecting a doubling in closing volumes to 5,030 homes, partially offset by a 4% decrease in the company’s average selling price to $251,000.

Home sale gross margin improved to $158.5 million or 12.6% of revenues, compared to a gross loss of $71.2 million or -10.9% of revenues in the second quarter of 2009.

Net new home orders for the quarter rose 25% to 4,218 units. Pulte’s cancellation rate went down to 18.2% from 21.7% in the previous year. This was attributable to a process change implemented by the company at the beginning of 2010. The quarter-end backlog went up 44% to 5,644 homes, valued at $1.6 billion, from the prior-year backlog of 3,916 homes, valued at $1.1 billion.

Revenues in the Financial Services segment soared 75% to $36.2 million due to a 72% rise in loan origination volumes. The mortgage capture rate for the quarter was 76%, compared with 91% for the same quarter of last year.

Pulte had cash and cash equivalents of $2.75 billion as of June 30, 2010, up from $1.86 billion as of December 31, 2009. The net debt-to-total capitalization ratio was 32% as of June 30, 2010, compared with 38% at the same period of previous year.

Pulte expects a modest seasonal improvement in demand for new homes in the second half of 2010. However, a sluggish growth in the homebuilding industry – which depends heavily on job growth, interest rates and the business cycle at large – will continue to hamper the company’s results.

As a result, we continue to recommend shares of the company as a Zacks #4 Rank (‘Sell’) in the short term and “Underperform” in the long term.

 
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