Pullback Provides Opportunity at PulteGroup

04/28/2017 2:50 am EST

Focus: INCOME

Crista Huff

Editor, Cabot Undervalued Stocks Advisor

Single-family U.S. homebuilder PulteGroup (PHM) reported adjusted first-quarter earnings per share (EPS) of $0.31, when analysts had expected $0.29, notes Crista Huff, editor of Cabot Undervalued Stocks Advisor.

Revenue came in at $1.63 billion vs. the consensus estimate of $1.75 billion. Closings, average selling prices, net new orders and backlog were all higher than a year ago.

The stock traded down as much as 7.42% this morning, and has since recouped about half that decline. The market is murmuring about these various concerns:

• Pulte’s net new orders rose 8.4%, which represents the slowest quarterly order growth in over a year.

• The U.S. announced a new 20% duty on Canadian softwood lumber, which could pressure homebuilders’ margins.

• Potential weakness in the housing market.

Frankly, share prices of U.S. homebuilders have experienced much better gains than the broader stock market year-to-date. A pullback in share prices at this time is perfectly normal. 

I would not read too much into it. Pulte is experiencing strong double-digit, multi-year earnings growth, with very low P/Es. Take advantage of today’s weakness in the share price and buy PHM. Strong Buy.

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