Bloomfield Hills, Mich.-based Pulte Homes will report its fourth quarter and full-year 2009 earnings Tuesday morning, followed in close order with a conference call, and analysts are expecting a reported loss of $0.19 per share for the quarter compared with a loss of $1.33 per share in the same quarter of 2008.
But most of the other public builders have surprised analysts by reporting earnings in the black thanks to the tax code change that allows companies to reclaim taxes paid back as far as five years as refunds today. Even though Pulte has tended to hold tightly to its land rather than selling it to realize a loss, there are reports that the company did sell some land at the end of 2009 at a loss, which could help the company claim a tax refund as its peers have done.
The call should also bring news of how the August merger of Pulte Homes with Centex is proceeding. Because of the merger, earnings comparisons with past years are difficult. CEO Richard Dugas can be expected to report on how successful the company has been at cutting costs because of the synergies created through the merger. In November, Dugas said the savings were being realized quicker than expected. Yet analysts remain skeptical about how fast and how well the companies will integrate. UBS Investment Bank analyst David Goldberg listed merger challenges as one of the reasons he thinks Pulte will underperform compared with its peers.
Land impairments are another factor that could inhibit profitability. Since the company has chosen to hold on to its land rather than sell it, Pulte must continue to impair it as the market falls, weighing on earnings in the short term, said Goldberg. On the upside, it is less likely Pulte will need to buy more land soon as some of its competitors have had to do, leaving its $1.5 billion in cash untapped.
Although Centex enhanced Pulte's entry-level product, Goldberg said he expects its active-adult market exposure could be a further drag as that market sits on the sidelines out of fear and worries of selling their existing homes.
The company's shift away from specs to built-to-order houses also could have inhibited it from benefiting fully from the tax credit for first-time buyers.
Pulte's stock fell Friday and was trading up slightly Monday morning at $11.10 per share.