PulteGroup (PHM) missed earnings estimates for the first quarter of 2014, but saw an increase in gross profit margin and average selling price.
First-quarter net income was $75 million, or 19 cents per share, which includes income tax expense of $55 million, compared to the prior year net income of $82 million, or 21 cents per share, including income tax expense of $1 million. Estimates were for 21 cents per share.
For the quarter, the company reported pretax income of $130 million, an increase of 58% over prior year pretax income of $82 million.
The first quarter effective tax rate of 42% was higher than expected primarily as the result of deferred tax expense associated with changes in certain state income tax rates.
"PulteGroup has gotten off to a strong start in 2014, with first quarter results showing gains resulting from our efforts to drive better pricing, operating margins and pretax earnings in support of higher returns on invested capital," said Richard Dugas, Jr., PulteGroup chairman, president and CEO. "Our first quarter gross margin of 23.8% is up 580 basis points over last year and 60 basis points over the prior quarter, marking our ninth consecutive quarter of gross margin expansion.
"We are pleased with the start of the spring selling season, as absorption paces per community improved from year ago levels and demand accelerated through the quarter. We continue to believe housing is in the early stages of a multiyear recovery benefitting from low interest rates, low inventory and continued relative affordability of homes, and with consumers looking for well-located houses and displaying a clear willingness to invest in those features they value most."
Home sale revenues for the first quarter were $1.1 billion, which was comparable with last year. Revenues for the quarter reflect a 10%, or $30,000, increase in average selling price to $317,000, offset by a 10% decrease in closings to 3,436 homes. The higher average selling price was the result of price increases in each of our entry level, move-up and active adult demographics.