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PI

PULTEGROUP INC/MI/ (PHM)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered $2.57 diluted EPS on $3.89B total revenues and 27.5% home sale gross margin; sequential margins were flat vs Q4 2024 (27.5%), while average selling price rose to $570K and net new orders were 7,765 units ($4.48B) .
  • Versus consensus, EPS and revenue modestly beat: EPS $2.57 vs $2.44 estimate*, revenue $3.89B vs $3.82B estimate*; EBITDA was in line at ~$699M vs ~$698M estimate* (minor beat) .
  • Guidance adjusted: FY closings cut to 29,000–30,000 (from ~31,000), H2 gross margin trimmed to 26.0%–26.5%, land spend reduced to ~$5B (from ~$5.5B), citing affordability/macro volatility and anticipated tariff impact (~1% of ASP) .
  • Capital deployment remained robust: $300M repurchases (2.8M shares) with $1.9B authorization remaining; quarter-end cash $1.3B and debt-to-cap 11.7% underpin flexibility—key stock catalysts include guidance reset, tariff commentary, and spec inventory normalization .

Note: *Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Maintained industry-leading margins despite elevated incentives: home sale gross margin 27.5% (flat QoQ), with favorable geography and buyer mix; ASP up 6% YoY to $570K .
  • Strong capital return and balance sheet: $300M buyback in Q1, $1.9B authorization remaining; cash $1.3B, debt-to-cap 11.7% .
  • Management executing “price over pace” discipline: “balancing price and pace with the bias towards price has resulted in gross margin being an important driver of returns” (Ryan Marshall) .

What Went Wrong

  • Demand headwinds and April volatility: net new orders down 7% YoY; management flagged affordability challenges and macro uncertainty (rates, tariffs, recession talk) impacting daily sales cadence .
  • Elevated incentives and tariff risk: incentives increased to ~8% in Q1, and tariffs expected to add ~1% of ASP cost in late Q4, driving slight H2 margin guide cut .
  • Volume guidance lowered: FY closings updated to 29K–30K (from ~31K), reflecting “price over pace” and spec reductions toward the 40–45% target .

Financial Results

YoY Comparison (Q1 2025 vs Q1 2024)

MetricQ1 2024Q1 2025
Total Revenues ($USD Billions)$3.95 $3.89
Diluted EPS ($)$3.10 $2.57
Home Sale Gross Margin (%)29.6 (27.5% down 210 bps YoY) 27.5
Home Closings (Units)7,095 6,583
Average Selling Price ($K)$538 $570
Net New Orders (Units)8,379 7,765
Backlog (Units)13,430 11,335
Backlog ($USD Billions)$8.20 $7.22
Financial Services Pretax ($USD Millions)$41 $36
Mortgage Capture Rate (%)84.2% 86.4%
SG&A (% of Home Sale Revenues)9.4% 10.5%

Sequential Comparison (Q4 2024 vs Q1 2025)

MetricQ4 2024Q1 2025
Total Revenues ($USD Billions)$4.92 $3.89
Diluted EPS ($)$4.43 (includes $0.93 insurance benefit) $2.57
Home Sale Gross Margin (%)27.5 27.5
Home Closings (Units)8,103 6,583
Average Selling Price ($K)$581 $570
Net New Orders (Units)6,167 7,765
Backlog (Units)10,153 11,335
Mortgage Capture Rate (%)85.9% 86.4%
SG&A (% of Home Sale Revenues)4.2% (benefit-driven) 10.5%

Vs. Wall Street Consensus (S&P Global)

MetricQ1 2025 Estimate*Q1 2025 ActualBeat/Miss
Primary EPS ($)2.44*2.57 Beat*
Revenue ($USD Billions)3.82*3.89 Beat*
EBITDA ($USD Billions)0.70*0.70 In line*

Note: *Values retrieved from S&P Global.

Segment & Regional Detail (Q1 2025 vs Q1 2024)

RegionClosings Q1’24 (Units)Closings Q1’25 (Units)Net New Orders Q1’24 (Units)Net New Orders Q1’25 (Units)
Northeast285 339 441 404
Southeast1,445 1,193 1,394 1,356
Florida1,917 1,650 1,972 1,869
Midwest990 1,090 1,274 1,388
Texas1,328 1,039 1,454 1,287
West1,130 1,272 1,844 1,461

KPIs and Operating Metrics

KPIQ3 2024Q4 2024Q1 2025
Spec % of Units in Production43% 53% 47%
Units Under Production (approx.)17,096 16,439 16,548
Finished Specs (Units)1,357 1,862 1,800
Cycle Time (Days)114 111 (working days) ~110
Average Community Count957 960 961

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
FY Closings (Units)FY 2025~31,000 29,000–30,000 Lowered
Q2 Closings (Units)Q2 2025n/a7,400–7,800 New
Gross Margin (%)Q2 202526.5%–27.0% 26.5%–27.6% Raised (upper bound)
Gross Margin (%)Q3 202526.5%–27.0% 26.0%–26.5% Lowered
Gross Margin (%)Q4 202526.5%–27.0% 26.0%–26.5% Lowered
SG&A (% of Home Sale Rev.)FY 2025~9.5% 9.5%–9.7% Slightly higher range
ASP ($K)Q2–Q4 2025$560–$570 each qtr $560–$570 each qtr Maintained
Effective Tax Rate (%)FY 2025~24.5% excl. discrete ~24.5% excl. discrete Maintained
Land Spend ($B)FY 2025~$5.5 ~$5.0 Lowered
Operating Cash Flow ($B)FY 2025~$1.4 ~$1.4 Maintained
Spec Inventory Target (%)Ongoing40%–45% 40%–45% (path from 53%→47%) Maintained (progressing)
Community Count Growth (%)FY 2025+3% to +5% QoQ YoY +3% to +5% Maintained
Tariff ImpactH2 2025n/a~1% of ASP; ~$5K/avg home; late Q4 timing New
Dividend per Share ($)Q1 2025 payout10% increase announced $0.22 declared (Apr 2, 2025) Confirmed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Incentives & AffordabilityIncentives at 7%, elevated; affordability core hurdle Incentives up to 7.2%; assume flat through 2025 Incentives ~8% on deliveries; hold elevated levels near term Higher incentives sustained
MarginsGM 28.8%; guide Q4 27.5–27.8% Q1 27% guide; FY: 26.5–27% per qtr Q1 actual 27.5%; Q2 26.5–27.6%; H2 26.0–26.5% Slightly lower H2
Spec InventorySpecs ~43% of WIP; finished ~1.4/community Specs 53%; plan to reduce to 40–45% Specs reduced to 47%; finished 1,800 units Normalizing lower
Land Spend & Optionality~$5–5.2B spend; 56% option lots Plan ~$5.5B; target ~70% option lots Lower to ~$5B; 244K lots under control; prudence stressed More cautious
Tariffs & Supply Chainn/an/aTariffs to add ~1% of ASP; categories include plumbing/HVAC/electrical/tile; impact late Q4 Emerging headwind
Cycle Times114 days; goal 110 by YE, 100 early 2025 111 working days; single-family ~100 ~110 days; single-family ~100; multifamily drives higher avg Improved/stable
Regional Trends (FL/TX)FL resilient; TX competitive; inventory better TX incentives higher; FL shoulder season optimism FL down ~5% YoY; TX first-time affordability headwind Mixed
Technology/AIBroad tech commentary n/aRobotic-assisted wall construction pilot (Hadrian X) Innovation progressing

Management Commentary

  • “Balancing price and pace with the bias towards price has resulted in gross margin being an important driver of our returns… our divisions have more room to maneuver” (Ryan Marshall) .
  • “We leaned into incentives… lowered specs to 47% of production… while still reporting strong gross margins of 27.5%” (Ryan Marshall) .
  • “Tariffs are expected to increase our house cost by an estimated 1% of average selling price… primarily impacting Q4” (Management) .
  • “We now expect to deliver between 29,000 and 30,000 homes in 2025… prioritizing price and margin over volume” (Management) .
  • “Repurchased 2.8M shares for $300M… ended with $1.9B remaining under authorization and $1.3B cash; debt-to-cap 11.7%” .

Q&A Highlights

  • Margins and incentives: Management assumes incentives consistent with Q1 (~8%) across the year; H2 gross margin trimmed partly due to tariffs and spec mix-through .
  • Tariff specifics: Estimated ~$5K per home (~1% ASP), affecting plumbing/HVAC parts, electrical components, porcelain/tile; impact weighted to late Q4 .
  • Volume vs price: April demand volatility drove a closings guide cut to 29K–30K; company will not “chase volume” at the expense of margins .
  • Share repurchases: $300M in Q1; Board authorized +$1.5B in January (remaining $1.9B). Management prefers reporting activity rather than guiding repurchase pace .
  • Regional and buyer mix: Move-up and active adult more resilient; Q1 option/lot premiums averaged ~$110K; FL business down ~5% YoY but not “catastrophic” .

Estimates Context

  • Q1 2025 EPS beat consensus by ~$0.13 (actual $2.57 vs $2.44 estimate*); revenue beat by ~$$0.07B (actual $3.89B vs $3.82B estimate*); EBITDA modestly above estimates* .
  • FY 2025 consensus EPS ~$11.36* vs company’s more cautious volume/margin outlook suggests potential for downward estimate revisions to H2 gross margin assumptions given tariff timing and incentives .

Note: *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Quarter quality: Solid execution with flat sequential gross margins despite higher incentives; EPS/revenue modestly beat Street*, validating “price over pace” strategy .
  • Guidance reset: Lower FY closings and H2 margin ranges reflect conservatism amid macro/tariff uncertainties—positioning reduces downside risk while preserving returns .
  • Margin drivers: Favorable mix, disciplined underwriting, and spec normalization (53%→47%) support margin resilience; incentives likely to remain elevated near term .
  • Tariff watch: Late Q4 cost impact (~1% ASP) is measurable but contained; procurement actions should mitigate; monitor policy trajectory and supplier negotiations .
  • Capital deployment: Strong buyback cadence with ample authorization and low leverage provides optionality for opportunistic repurchases or selective transactions .
  • Region/mix lens: Move-up/active adult cohorts underpin ASP and options revenue; FL/TX dynamics mixed but manageable within diversified footprint .
  • Trading setup: Near-term stock narrative hinges on incentives path, H2 margin prints, tariff clarity, and order cadence through summer; upside if incentives recede and demand stabilizes .