PulteGroup second-quarter earnings beat, strength in steel stocks today, and Schnitzer Steel (SCHN) moves from Buy to Hold.
Pulte Reports Huge Second-Quarter Earnings Beat
Single-family U.S. homebuilder PulteGroup (PHM – yield 1.5%) reported adjusted second-quarter earnings per share (EPS) of $0.47 this morning, when analysts had expected $0.41, with a range of 17 to 51 cents. Revenue was $2.02 billion vs. the consensus estimate of $2.03 billion.
Pulte’s quarterly successes included increases in new orders, higher average selling prices, number of homes sold and backlog. CEO Ryan Marshall commented, “We believe housing demand can continue to move higher over the coming quarters.” The company repurchased $300 million of stock during the quarter.
You can read the earnings press release here, and visit the company’s website to access the earnings conference call.
Nationwide housing starts rose 8.3% in June. A recent Reuters poll projects that a chronic shortage of homes and steady demand are expected to drive U.S. home prices in the next few years.
PHM is an undervalued growth stock. The stock broke out of a very long-term trading range this month, then pulled back about 3%. This is an excellent time to buy PHM. Given a neutral-to-strong stock market, I expect the stock to promptly begin a sustainable run-up. Strong Buy.
Steel Stocks Up On Higher Pricing and Profits at AK Steel
AK Steel (AKS )—not in the Cabot Undervalued Stocks Advisor portfolios—is up 12% at midday because the quarterly earnings release revealed higher steel pricing leading to margin expansion. EPS came in at $0.19 when analysts expected $0.12. (I do not recommend AKS due to the company’s extremely high debt-to-capital ratio.)
As a result of the excitement over AKS earnings, most steel stocks rose nicely today.
Schnitzer Steel (SCHN – yield 2.8%) is up 3% at midday. I’m moving SCHN from Buy to Hold now as it approaches my 29 price target. Hold.
Commercial Metals (CMC – yield 2.4%) is up 5% at midday. Continue to buy CMC with a near-term price target of 24. Strong Buy.
I expect most steel stocks to retrace their highs from December 2016, and then to rest or even pull back for a while. Since CMC’s fundamentals remain extremely attractive, I’ll be willing to add the stock back into the portfolio if the price chart presents another obvious buying opportunity down the road.