PHM Financial Analysis

Analysis Date: 1/31/2025

Business Model

PulteGroup generates revenue primarily through homebuilding operations across multiple buyer segments

Revenue Sources

• First-time homebuyer segment (40% of closings in 2024)
• Move-up homebuyer segment (38% of closings in 2024)
• Active adult segment (22% of closings in 2024)

Revenue Distribution by Channel

• Built-to-order and spec homes across price points

Income Statement Analysis

• Home sale revenues increased 13% driven by 6% higher closings and 6% higher average selling price
• Gross margin declined 140 bps to 27.5% due to higher incentives
• SG&A improved 320 bps to 4.2% of revenues aided by insurance benefits

Balance Sheet Analysis

• Strong balance sheet with $1.7B in cash
• Debt-to-capital ratio improved to 11.8% from 15.9%
• Net debt-to-capital ratio at -0.3%, reflecting negative net debt position

Cash Flow Analysis

• Generated $1.7B in operating cash flow in 2024
• Invested $5.3B in land acquisition and development
• Returned $1.4B to shareholders through dividends and share repurchases

Capital Allocation

Company maintains disciplined capital allocation strategy focused on: 1) Investing in land and operations to support growth, 2) Paying dividends (10% increase announced), 3) Share repurchases ($1.2B in 2024), and 4) Maintaining strong balance sheet with low leverage

Management Commentary

Strong Q4 completed record-setting year with nearly $18B in revenues and $3.1B in net income

Operating model driving superior returns with 27.5% ROE in 2024

Elevated mortgage rates impacting buyer demand and affordability

Overall Sentiment: Confident in business model and positioning while acknowledging near-term market challenges

Recommendation

Rating: Buy

Reason for Rating: Strong operational execution, disciplined capital allocation, and attractive valuation support positive outlook

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results.

Generated on: 1/31/2025, 12:58:07 PM