RBC Turns Bullish On PulteGroup, Sees 21% Upside

RBC Capital upgraded PulteGroup’s stock to Buy from Hold and lifted the price target to $53 (20.5% upside potential) from $52, following the home construction company’s better-than-expected 3Q earnings and revenues. Shares rose 3.2% on Friday.

On Oct. 23, RBC Capital analyst Michael Dahl said that “PHM remains well positioned on land, margins, and mix to deliver a fourth straight year of >20% ROTE in ’21 (we est. +250 bps to 23.3%), which should command a higher premium. The restart of the buyback in 4Q also provides support.” The analyst views the recent 14% pullback in the stock as an attractive buying opportunity.

On Oct. 22, PulteGroup (PHM) reported 3Q EPS of $1.34, which topped analysts’ expectations of $1.12. Revenue came in at $2.95 billion, higher than the Street consensus of $2.73 billion. Adjusted earnings increased 33% driven by higher operating margin. Sales grew 7.7% year-over-year on higher home sales and a “4% increase in closings to 6,454 homes, combined with a 3% increase in the average price of homes closed to $438,000.”

PulteGroup’s CEO Ryan Marshall said “The dramatic rebound in housing demand that began in May continued through the third quarter, as we generated exceptionally strong sales across all buyer groups and realized a 36% increase in net new orders over last year.” (See PHM stock analysis on TipRanks).

Currently, the Street is bullish on the stock. The Strong Buy analyst consensus is based on 8 Buys and 2 Holds. The average price target of $53.29 implies upside potential of about 21.1% to current levels. Shares have increased by 13.4% year-to-date.

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