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Why PulteGroup Stock Rose Today

By Joe Tenebruso – Jul 23, 2020 at 5:26PM

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The homebuilder is effectively navigating the COVID-19 crisis.

What happened 

Shares of PulteGroup (PHM 0.62%) climbed 4.7% on Thursday, following the release of the homebuilder's second-quarter results. 

So what

PulteGroup's home sale revenue rose 3% year over year to $2.5 billion. The gains were driven by a 6% rise in closings, to 5,937 homes, which was partially offset by a 3% decline in its average sale price to $416,000.

"Following a period of demand weakness beginning in late March and into April as COVID-19 first impacted the country, new home sales experienced a material acceleration as the second quarter progressed," CEO Ryan Marshall said in a press release.

Despite numerous challenges posed by the coronavirus pandemic, the U.S. housing market has held up relatively well. "The recovery in demand reflects a number of factors, including low interest rates, a restricted supply of existing-home inventory, pent-up demand following the economic shutdown, the appeal of single-family living in a new home, and a desire among some buyers to exit more densely populated urban centers," Marshall said.

Miniature homes on top of rising stacks of gold coins.

Investors cheered PulteGroup's Q2 results. Image source: Getty Images.

Better still, higher loan volumes helped drive PulteGroup's financial services revenue nearly 70% higher to $95 million. This, combined with gross margin expansion and operating cost reductions, helped boost the homebuilder's profits. All told, PulteGroup's adjusted earnings per share surged 34% to $1.15.

Now what

PulteGroup ended the quarter in a strong financial position, with $1.7 in cash reserves. Its backlog also improved by 12%, to 13,214 homes, and 13% on a total value basis to $5.8 billion.

Looking ahead, Marshall is optimistic in regards to the health of the housing market. "Given the strength of second-quarter sales, we are encouraged about the back half of 2020," he said.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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