Pulte raises Centex savings view, shares surge
NEW YORK (Reuters) - Pulte Homes Inc (PHM.N) said its recent acquisition of a rival homebuilder will boost its financial health more than previously estimated, sending its shares up 5 percent despite a quarterly loss and ongoing challenges in the battered industry.
Pulte, which after buying Centex Corp has operations in 29 states, said on Wednesday its new target for efficiencies and savings from is $440 million, up 25 percent from its prior estimate.
The upward revision to the merger's benefits as well as higher-than-expected gross margins and lower-than-expected impairments make the third-quarter results "a positive for the company," J.P. Morgan analyst Michael Rehaut wrote in a note to clients.
Pulte shares were up 47 cents, or 5.1 percent, to $9.70 in afternoon trading on the New York Stock Exchange.
Pulte's third-quarter gross margins of 13.1 percent, excluding interest, merger costs and impairments, were up from the second quarter and were solidly higher than Rehaut's 11.2 percent estimate.
In another source of comfort for investors, Pulte retired $1.7 billion of debt in the quarter, more than Fox-Pitt analyst Robert Stevenson had expected.
"These results are not horrific, but some investors were expecting the worst," Stevenson said.
The company is operating under a waiver of one of its credit facility covenants until December 15, but says that it has enough cash -- $1.6 billion -- to forego the facility if it fails to obtain either an extension of the waiver or a new agreement.
But the Bloomfield, Michigan-based company still lost money as competition from cheap foreclosed homes and rising unemployment sap demand for new homes despite signs of stabilization in the broader housing market.
"The economy is still relatively fragile," Chief Executive Richard Dugas said during a conference call with analysts.
Pulte reported a quarterly loss of $1.15 per share, or $361.4 million, far worse than analysts' average forecast of a loss of 69 cents per share, according to Thomson Reuters
I/B/E/S.
The summer months saw the entire housing market -- both resale and new homes -- get a boost from an $8,000 federal tax credit for first-time homebuyers. But more recently, demand has shifted away from new homes, with sales nationwide in September dropping 3.6 percent.
Companies like Pulte do not have time to close those deals before the credit expires at the end of the month, so buyers armed with the credit are turning to previously owned instead of new homes. Those sales rose 6.1 percent in September.
"September was softer than July or August," said Chief Operating Officer Steve Petruska during the conference call.
"There are still a lot of buyers shopping," Dugas added. "But you know if they can't get home from us by November 30, they're buying from a resale."
(Reporting by Helen Chernikoff, Editing by Maureen Bavdek, John Wallace and Tim Dobbyn)
