PulteGroup, Inc. (NYSE: PHM), Atlanta on Tuesday before market open reported net income of $290 million, or $1.01 per share, for its third quarter ended September 30, up T4% from prior-year net income of $178 million, or $0.58 per share. The gain beat analyst estimates by $0.06 per share.
The higher net income for the period was primarily the result of a 25% increase in home building revenues, in combination with a 190 basis point expansion of operating margin.
Home sale revenues for the third quarter increased 25% over the prior year to $2.6 billion. The higher revenues for the period reflected a 17% increase in closings to 6,031 homes, combined with a 7%, or $27,000, increase in average sales price to $427,000.
Home sale gross margin for the third quarter was 24.0%, up 10 basis points over the prior year and consistent with the company’s reported gross margin for the second quarter of 2018. Home building SG&A expense for the quarter was $253 million, or 9.8% of home sale revenues, compared with $237 million, or 11.6% of home sale revenues, in the prior year. Operating margin for the third quarter expanded 190 basis points over last year to 14.2%.
Net new orders for the third quarter increased 1% to 5,350 homes. The value of third-quarter net new orders was $2.3 billion, an increase of 1% over the prior year. For the quarter, the company operated out of 843 communities compared with 778 communities in the third quarter of 2017.
Unit backlog for the quarter was up 3% over the third quarter of last year to 11,164 homes, with backlog value increasing 5% to $4.9 billion. The average price of homes in backlog increased 2% over the prior year to $440,000.
Third quarter pretax income for the company's financial services operations increased 10% to $20 million. The increase in pretax income for the period was driven by higher mortgage origination volumes resulting from growth in the company’s home building operations. Mortgage capture rate for the quarter was 75%, compared with 80% in the prior year.
“The critical underpinnings that have supported a slow but steady housing recovery, including a strong economy, low unemployment, high consumer confidence and limited home inventory, remain solidly in place,” said President and CEO Ryan Marshall. “While buyer concerns around affordability and rising mortgage rates appear to have impacted near term market dynamics, traffic trends indicate that buyer interest levels are still high and that the overall housing recovery remains on track.”
During the quarter, the company repurchased 2.4 million common shares for $67 million, or an average price of $28.14 per share.
