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PI

PULTEGROUP INC/MI/ (PHM)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 delivered resilient top-line and EPS despite a tougher demand backdrop: total revenue $4.40B (+0% QoQ, -1.6% YoY) and diluted EPS $2.96; EPS beat S&P Global consensus and revenue came in above expectations, while EBITDA was slightly below consensus . EPS: $2.96 vs $2.89*; Revenue: $4.40B vs $4.31B*; EBITDA: $789M* vs $807M* (see Estimates Context).
  • Gross margin compressed as incentives rose and spec mix stayed elevated: home sale gross margin 26.2% (Q2: 27.0%; Q3’24: 28.8%); incentives were 8.9% of gross sales price (Q2: 8.7%; Q3’24: 7.0%), with management guiding Q4 gross margin to 25.5%-26.0% as they prioritize selling through finished specs .
  • Orders/backlog moderated: net new orders 6,638 units (-6% YoY), backlog 9,888 units ($6.23B) vs 12,089 units ($7.69B) last year; average absorption of 2.2/month (vs 2.4 last year) underscores softer first-time demand and regional pressure in Texas/West, partially offset by strength in Florida/SE and active adult .
  • Guide/tone: Q4 closings 7,200–7,600; full-year closings “likely” 29,000–29,400 (could exceed prior target); SG&A 9.5–9.7% and ASP $560–$570k maintained; tax rate 24.5% in Q4; tariff headwinds largely a 2026 event ($1,500/home) .
  • Capital returns and balance sheet remain strong: $300M buyback in Q3 ($900M YTD); cash $1.5B; debt-to-capital 11.2%; dividend declared $0.22 per share (payable Oct 2, 2025) .

What Went Well and What Went Wrong

  • What Went Well

    • EPS and revenue ahead of Street; execution resilient with operating margin of 16.8% and ROE of ~21% TTM, despite slower demand in several markets .
    • Florida and several East/Midwest markets outperformed; Florida orders +2% YoY; management highlighted strong positions, experienced operators, and improving stabilization in key markets .
    • Active Adult (Del Webb) remains a structural advantage with higher price/margins; management reiterated mix moving back toward 25% in 2026 as new communities open (“highest-margin closings”) .

  • What Went Wrong

    • Margin compression continued: home sale gross margin fell to 26.2% (Q2: 27.0%; Q3’24: 28.8%) amid higher incentives (8.9%) and elevated spec mix near ~50% .
    • Orders/backlog declined YoY on affordability and confidence headwinds; absorption 2.2 vs 2.4 last year; first-time buyers particularly pressured; capture rate fell to 84.4% (Q3’24: 86.7%) .
    • Texas/West remained soft; management is using incentives tactically to move finished inventory and stay competitive, and aims to normalize finished specs per community (currently ~2 vs ~1–1.2 target) .

Financial Results

P&L and Margins

MetricQ3 2024Q2 2025Q3 2025
Total Revenues ($USD)$4,476,342,000 $4,403,755,000 $4,404,799,000
Home Sale Revenues ($USD)$4,343,227,000 $4,267,975,000 $4,248,375,000
Diluted EPS ($)$3.35 $3.03 $2.96
Home Sale Gross Margin (%)28.8% 27.0% 26.2%
Operating Margin (%)—17.9% 16.8%
SG&A (% of Home Sale Rev.)9.4% 9.1% 9.4%

Notes: “—” indicates not disclosed in source.

Orders, Backlog, Closings, Pricing, Mortgage KPIs

KPIQ3 2024Q2 2025Q3 2025
Closings (Units)7,924 7,639 7,529
Average Selling Price ($000)$548 $559 $564
Net New Orders (Units)7,031 7,083 6,638
Net New Orders ($USD)$3,928,860,000 $3,887,938,000 $3,639,690,000
Backlog (Units)12,089 10,779 9,888
Backlog ($USD)$7,694,761,000 $6,843,239,000 $6,234,554,000
Mortgage Capture Rate (%)86.7% 84.8% 84.4%
Absorption (Homes/Community/Month)2.4 (Q3’24) 2.4 (Q2’25) 2.2

Segment Breakdown (Q3 2025)

SegmentRevenue ($USD)Pre-Tax Income ($USD)
Homebuilding$4,301,544,000 $723,430,000
Financial Services$103,255,000 $44,358,000
Consolidated$4,404,799,000 $767,788,000

Capital & Cash Flow (Select)

  • Cash $1.48B; debt-to-capital 11.2%; net debt-to-capital 1.1% at 9/30/25 .
  • YTD operating cash flow $1.10B; YTD buybacks $900M (8.2M shares at $109.81 avg); Q3 buybacks $300M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Gross Margin (Home Sale)Q4 202526.0%–26.5% (back-half guide affirmed in Q2) 25.5%–26.0% Lowered
Closings (Units)Q4 2025—7,200–7,600 Introduced
Closings (Units)FY 2025~29,000 (refined in Q2) 29,000–29,400 (“could exceed previous”) Raised
ASP of Closings ($)Q4 2025 & FY 2025$560k–$570k $560k–$570k Maintained
SG&A (% of Home Sale Rev.)FY 20259.5%–9.7% 9.5%–9.7% Maintained
Tax Rate (%)Q4 2025~24.5% (ex-discrete) ~24.5% Maintained
Community CountQ4 2025+3%–+5% YoY +3%–+5% YoY Maintained
Land SpendFY 2025~$5B ~$5B Maintained
Cash Flow from OpsFY 2025~$1.4B ~$1.4B Maintained
Tariffs Impact2025/2026Lower impact in late Q4’25 than initially expected Little/no 2025 impact; ~+$1,500/home starting 2026 Updated clarity
DividendOngoingPrior $0.22 run-rateDeclared $0.22 (payable Oct 2, 2025) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Demand/Consumer Confidence & AffordabilityQ1: Consumers “caught between desire for homeownership and affordability challenges”; diversified model supports margins . Q2: Volatile demand; absorption 2.4; first-time and move-up down; active adult up .Absorption 2.2; demand “good albeit competitive”; weaker confidence muted impact of lower rates .Slightly weaker vs 1H
Incentives & MarginsQ2 gross margin 27.0% with incentives 8.7%; back-half margin guide 26–26.5%; tariffs impact lower in Q4 than feared .Gross margin 26.2%; incentives 8.9%; Q4 guide trimmed to 25.5–26.0% to move specs .Incentives up; GM down
Spec Mix & InventoryQ2 spec ~47%; plan to normalize to 40–45% by YE .Specs ~49–50%; finished specs ~2/community vs ~1–1.2 target; remain elevated next few quarters .Elevated; gradual normalization targeted
Regional TrendsQ2: Strength in Midwest/SE and Florida (+2% orders); softness in West/Texas .Similar: Florida strength; Texas/West soft; stabilization signs in SE/Northeast .Mixed but stable pattern
Active Adult/Del WebbQ2: Strong response; highest margins; mix to 24–25% in 2026 as new communities open .Continued emphasis; Del Webb Explore broadens TAM (non-age-restricted) .Positive structural driver
Tariffs/CostsQ2: Tariff headwind pushed to Q4’25 minimal; cost stability with pockets of relief .2025 little/no impact; ~$1,500/home starting 2026; development cost relief likely benefits 2H’26–2027 .Near-term benign; 2026 watch
Build Cycle Time—Build cycle ~106 days, enabling leaner inventory .Improved

Management Commentary

  • “We generated home sale revenues of $4.2 billion, and earnings of $2.96 per share... while returning $344 million to shareholders” .
  • “Operating margins of 16.8% and earnings of $2.96 per share... ROE of 21% TTM” .
  • “Buyer demand... is good, albeit competitive... Weaker consumer confidence and stretched affordability” .
  • “Incentives in the third quarter were 8.9%... We now expect fourth quarter gross margins to be 25.5% to 26%” .
  • “We expect to close between 7,200 to 7,600 homes in the fourth quarter... full year closings likely 29,000 to 29,400” .
  • “Florida operations... two quarters in a row of positive comps... stabilization” .
  • “Tariffs will have little to no impact on closings in 2025, but could increase build costs by roughly $1,500 per home starting in 2026” .

Q&A Highlights

  • Incentives and margin trajectory: Incentives 8.9% (about one-third financial, two-thirds design/price); Q4 margin cut reflects moving finished spec inventory; buy-down savings from lower rates are modest vs broader competitive dynamics .
  • Spec inventory strategy: ~2 finished specs per community vs ~1–1.2 target; expect spec share to hover near ~50% for next few quarters as mix of built-to-order rebuilds; focus on converting specs while controlling starts .
  • Regional divergence: Less incentives in Florida/SE; more in Texas/West; management remains constructive on Texas given population/job growth despite near-term softness .
  • Cost outlook: Stick-and-brick ~$79/sqft (flat YoY); some relief in land development (earthmoving/underground), but P&L benefits likely 2H’26–2027; labor stable .
  • Capital allocation: Continued balanced approach—invest in land, maintain dividend, return excess via buybacks ($300M in Q3; $900M YTD) .

Estimates Context

MetricS&P Global Consensus*ActualSurprise
EPS (Primary)$2.889*$2.96 +$0.07 (Beat)
Revenue ($)$4,307,326,110*$4,404,799,000 +$97.5M (Beat)
EBITDA ($)$806,758,410*$789,446,000*-$17.3M (Miss)
  • Consensus counts: EPS N=12*, Revenue N=10*; Target Price mean $137 (N=13)*.
  • Implications: modest top-line/EPS beat should support near-term estimate stability; continued margin compression and Q4 GM guide cut may cap upward EPS revisions; active adult mix and cost relief into 2026 are potential medium-term offsets.
    *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Modest beat on EPS and revenue, but a more cautious Q4 gross margin guide (25.5%–26.0%) signals ongoing pricing/incentive pressure as the company sells through elevated specs—near-term margin headwind vs peers with less spec exposure .
  • Demand is “good but competitive”; absorption normalized to pre-COVID range (2.2 vs 2.4 last year), with pronounced strength in Florida/SE and softness in Texas/West; watch for regional mix shifts in Q4 .
  • Active Adult remains the structural differentiator (highest-margin product); new Del Webb and Del Webb Explore communities set up mix/margin tailwind for 2026 if demand stabilizes .
  • Cost/tariff setup benign near term (2025) with potential development-cost relief in late 2026; 2026 tariff headwind (~$1,500/home) appears manageable .
  • Balance sheet and FCF support continued buybacks/dividend; $1.5B cash, 11.2% debt-to-capital, $300M Q3 buyback, $0.22 dividend declared .
  • Stock drivers: trajectory of incentives/spec clearance vs absorption into Q4; Q4 closings execution (7,200–7,600) and any 2026 commentary on mix and margins; regional momentum in Florida vs Western markets .
  • Medium-term: if consumer confidence improves and rates ease, PHM’s diversified platform, shorter build cycle (106 days), and land-light pipeline ($5B annual land spend) should position the company to re-accelerate volume and rebuild margins in 2026 .

Appendix: Additional Data Points

  • Financial services pre-tax income: $44M (Q3 vs $55M LY); capture rate 84.4% (vs 86.7% LY) .
  • Shareholder returns: repurchased 2.4M shares for $300M in Q3; 8.2M shares for $900M YTD; $1.3B authorization remaining at quarter-end .
  • Balance sheet: cash and equivalents $1.45B; net debt-to-capital 1.1% .