PulteGroup, Inc. (NYSE:PHM)‘s first quarter home sales revenues were $1.1 billion, a 35% increase compared to $814 million in the same period for 2012. Gross margin was 22.9% and rose 420 basis points over 2012 and 110 basis points over last year’s fourth-quarter. New orders were valued at $1.6 billion, 18% higher than last year’s orders valued at $1.3 billion.
For 2013 and 2014, the company has increased investments in land and development to $1.4 billion annually. PulteGroup, Inc. (NYSE:PHM)‘s growth rate for 2014 is expected to be 18% and over the next five years it is estimated at 33%, above the industry average. With its current price trading at 13 times 2014 projected earnings, the company seems like a compelling buy.
Toll Brothers notes good time to build homes
CEO Douglas C. Yearley, Jr. also sees a sense of urgency in buyers as home prices have increased and demand continues to rise. Toll Brothers Inc (NYSE:TOL) had a significant second quarter 2013, with a 57% increase in the dollar value of its home sales and a 36% increase in the number of units sold; the biggest quarterly increase in seven years.
Net income was $24.7 million, or $.14 per diluted share, versus net income for second quarter of 2012 of $16.9 million, or $.10 per diluted share. Second quarter revenues were $516 million, increasing 38% over the same period last year, and 894 units were delivered in the period, a rise of 33% over last year. Gross margin, excluding interest and write-downs, was almost unchanged from last year at 23.3%.
Full year 2013 EPS is estimated at $.81 and next year it is projected to increase to $1.51. Toll Brothers Inc (NYSE:TOL) estimated growth rate for 2014 is an impressive 86% and its 5-year number is 62%, well above the industry average. The stock currently trades at 22 times 2014 earnings, so these shares present another buying opportunity.
Conclusion
As the housing market continues its recovery, investors can expect home sales to continue to improve. The home builders discussed above are already showing results and expectations of better days ahead.
The three companies mentioned have betas that are well over 1, so expect considerable volatility in the share price. Both PulteGroup, Inc. (NYSE:PHM) and Toll Brothers Inc (NYSE:TOL) appear to be better choices for an investment term exceeding one year. Lennar Corporation (NYSE:LEN)’s expected low growth after 2014 and its relatively high debt to equity level of 125 is something investors should watch closely before deciding to buy.
The article Builders Optimistic About Improving Home Sales originally appeared on Fool.com and is written by Eileen Rojas.
Eileen Rojas has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Eileen is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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