PulteGroup (PHM, Financial) delivered a quarter of strong financial performance with impressive improvement in its earnings. On the back of a solid operational performance, PulteGroup expects good growth in the coming quarters. It is now working on various key initiatives to improve the fundamentals of the business. As a result, the company is confident of reaping long-term returns.
PulteGroup is also working to maintain a strong cash flow and balance sheet. In addition, the company has also increased its quarterly dividend to attract more investors. The focus of the company is to enhance shareholder value. So, PulteGroup is focusing on returning capital to shareholders through share repurchase programs.
Accelerating nicely
With the growing housing market, the company is further accelerating its Value creation strategy. Under this it is diverting its capital to acquire more land to support its aggressive growth. The company is further revealing good improvement in the investment in 2014. It is anticipating 40% improvement in investments than 2013.
The company is steadfast in maintaining a healthy balance-sheet and returning funds to the share-holders. It has recently announced a 60% improvement in the dividend offering. Besides this, it has also expanded its share repurchase authorization which will also enhance its cash balance in the future, reflecting a healthy and attractive balance sheet.
A concern
PulteGroup is little concerned about the slow growth in the housing industry. However, it is seeing positive signs and bright growth opportunities in the U.S market. The economy is improving which is leading to low inventory, low mortgage rates and favourable demographic trends which are showing good improvement opportunities for PulteGroup in future. The company is confident of improving the mortgage availability for the first time home buyers with some of the impressive changes in FHFA.
It is seeing good sales opportunities in Southern markets such as in Florida and Carolinas. However, the demand is little soft, but the company is pleased with the improvements in the operational results from Dominion assets. This growth is expected to further strengthen the market position of the company in the coming days.
Conclusion
The stock looks decent with the trailing P/E of 17.30 while the forward P/E of 15.17 shows impressive growth in the earnings in the near term. However, in the long term, the company’s earnings are expected to grow with a CAGR of just 7.48%, which is lower than the industry average of 18.59%. The 60% increment in the dividend can be a good attraction for investors. Considering these facts, it can be seen that PulteGroup is a good pick as of now while the investors seeking long term gains should definitely stay away from the stock.
