Bloomfield Hills, MI, October 26--Pulte Homes Inc. said that its third-quarter earnings soared 60 percent, despite sluggish sales from an aggressive bet on Las Vegas, one of the nation's most sizzling housing markets. The results still fell short of Wall Street's lowered expectations.
The company said net income was $269 million, or $2.07 per share, with income from continuing operations of $259 million, or $1.99 per share. That was 1 cent below the mean forecast of analysts polled by Thomson First Call.
Total revenue for the three months ended Sept. 30 was $3 billion, compared with $2.4 billion for the same quarter last year.
Earlier this month, Pulte lowered its guidance for the quarter by a nickel to $1.95 to $2.05. It also lowered its full-year guidance to $7.40 to $7.70, a range it reaffirmed Monday. The company's previous full-year guidance was $7.80 to $8.
Pulte said the change was sparked primarily by slow sign-up rates and increased cancellations in Las Vegas. The company was forced to slash its prices there from 5 percent to 28 percent.
That was an abrupt change from its recent aggressive increases, which have helped drive up housing costs by tens of thousands of dollars in one of the country's hottest real estate markets.
Chief executive Richard Dugas Jr. said the new policy was helping.
"We would note that response to our new pricing has been positive and has resulted in a significant increase in buyer interest and sales activity in Las Vegas," he said in a statement.
Overall, home orders were up 11 percent for the quarter. Excluding Las Vegas, the figure would have been 24 percent, Pulte said.
Pulte's net income for the first three quarters was $589 million, up 56 percent from last year. Sales increased to $7.5 billion from $5.9 billion during the first nine months of 2003.
Dugas predicted full-year earnings in 2005 would increase to $9 to $9.50, thanks to the company's "strong market position and our ability to further expand our share of the U.S. housing market."
Earlier Monday, Credit Suisse First Boston upgraded Pulte's stock from "neutral" to "outperform." Analyst Ivy Zelman said the company was well-positioned compared to other builders because of its geographic diversity. In addition, it is well insulated against a rise in interest rates because 40 percent of its sales are geared toward "active adults," or empty nesters, whose home-buying plans tend not to be as strongly affected by interest rates, she said.
Zelman said the risk of Pulte's "aggressive growth plans," illustrated by the situation in Las Vegas, already was reflected in the stock's decline this month. Pulte's shares have fallen 17 percent since it reduced its earnings guidance.
