PulteGroup Inc. (PHM) reported a narrower loss of $9 million or 3 cents per share (excluding goodwill impairment, construction and other insurance reserves and land-related charges) in the third quarter of 2010 compared with $63 million or 20 cents per share (excluding merger and debt retirement costs and land-related charges) in the same quarter of prior year. The loss was also lower than the Zacks Consensus Estimate of 5 cents per share.
Consolidated revenues in the quarter slid 3% to $1.06 billion, barely higher than the Zacks Consensus Estimate of $1.05 billion. The decline in consolidated revenues was mainly attributable to lower revenues generated from the company’s Homebuilding segment on the back of challenging industry conditions.
Revenues in the Homebuilding segment dipped $26.04 million or 2.5% to $1.03 billion as closing volumes fell 7% to 3,865 homes, offset partially by a 5% rise in average selling price to $265,000 from $253,000 a year ago. Excluding land-related charges, interest expense and merger-related costs, home sale gross margin deteriorated to $171.29 million or 16.7% from $217.33 million or 17.2% in the previous year.
Net new home orders dwindled 12% to 3,566 units from 4,048 units a year ago. Pulte’s cancellation rate went down to 19.1% from 22.6% in the previous year. The quarter-end backlog slashed 36% to 5,345 homes, valued at $1.45 billion, from the prior-year backlog of 8,383 homes (including 4,316 homes related to Centex Corporation, acquired by the company in August 2009) valuing $2.2 billion.
Revenues in the Financial Services segment sagged $7.3 million or 21% to $27 million. The mortgage capture rate for the quarter was 78% compared with 86% in the corresponding quarter of last year.
Pulte had cash and cash equivalents of $2.62 billion as of September 30, 2010, up from $1.52 billion in the comparable period in 2009. The net debt-to-total-capitalization ratio was 42% as of the above date, down from 46% in the same period of previous year.
Pulte continues to focus on cost reduction actions. The company aims to reduce selling, general and administrative expenses by $100 million on a year-over-year basis in 2011. However, a sluggish growth in the homebuilding industry – which is heavily dependent on generation of jobs, interest rates and the business cycle at large – will continue to hamper the company’s results. As a result, the company has Zacks #3 Rank on its stock, reflecting a Hold recommendation for the short term.
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