PulteGroup, Inc. (NYSE: PHM), Atlanta, on Thursday reported net income of $273 million, or $0.83 per share, for the fourth quarter ended Dec. 31. The gain, which included $0.16 per share of insurance and income tax benefits, compared with net income of $228 million, or $0.64 per share, included $0.07 per share of benefits associated with the reversal of certain mortgage and insurance reserves, for the prior-year quarter.
Analysts polled by The Wall Street Journal were expecting a profit of $0.59 per share.
Home sale revenues for the fourth quarter totaled $2.4 billion, an increase of 21% over the prior year. Higher revenues for the period were driven by a 9% increase in closings to 6,197 homes, combined with an 11% increase in average selling price to $391,000. The average selling price increased due to a shift in the mix of homes closed, along with price increases realized by all three of the Company’s national brands: Centex, Pulte Homes and Del Webb.
For the quarter, net new orders increased 15% over the prior year to 4,202 homes.
The dollar value of fourth quarter orders increased 22% over the prior year to $1.7 billion. The company ended the year with 726 active communities, which represents an increase of 17% over the comparable prior year period.
PulteGroup’s year-end backlog of 7,422 homes, valued at $2.9 billion, compares with prior year backlog of 6,731 homes, valued at $2.5 billion. The average selling price in backlog increased 9% over the prior year to $396,000, which reflects a continued mix shift toward higher priced homes and moderate price increases.
Beginning with this quarter’s reporting, the Company reclassified internal and external sales commission expense from home sale cost of revenues to SG&A. Based on this reclassification of commission expense, the Company’s reported home sale gross margin was 24.8% in the fourth quarter. Commission expense was 3.5% of revenue in the quarter.
SG&A expense in the fourth quarter, including commissions, was $208 million, or 8.6% of home sale revenues. Fourth quarter SG&A includes a $55 million benefit relating to a reversal of construction related insurance reserves in the period. SG&A expense, including commissions, in the fourth quarter of 2015 was $210 million, or 10.5% of home sale revenues. Prior year SG&A included a $30 million benefit relating to a reversal of construction related insurance reserves.
The company’s financial services operations reported pretax income for the quarter of $25 million. Prior year financial services pretax income of $29 million included a $12 million benefit relating to a reversal of mortgage repurchase reserves. Financial services pretax income primarily benefited from higher closing volumes in the company’s home building operations and a fourth quarter capture rate of 82%.
For the full year, PulteGroup earned $602.7 million, up from $494.1 million in 2015.
“The gains PulteGroup realized for the quarter and full year reflect the successful investments we are making into our business, in combination with the positive demand conditions that continue in the housing market,” said Ryan Marshall, President and CEO of PulteGroup. “We believe that continued favorable trends in the economy, job growth, demographics and consumer confidence can more than offset the impact of modestly higher rates, allowing the housing recovery to continue at a steady pace.”
