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PulteGroup has favorable geographic mix, Oppenheimer sees upside to 2023 EPS consensus estimate

Published 15/04/2023, 12:04 am
Updated 15/04/2023, 12:04 am
© Reuters.

By Sam Boughedda

Oppenheimer raised its price target for PulteGroup (NYSE:PHM) to $73 from $68 per share, maintaining an Outperform rating on the stock as well as reiterating it as the firm's top pick in the homebuilder sector.

Analysts said the firm expects multiple expansion "given a positive backdrop for builders broadly and because PHM likely will have the highest ROE in the space this year."

PHM shares have been boosted by the comments, rising more than 1% at the time of writing on Friday.

"This premium is sustainable in 2023, we think, given Pulte's gross margin outlook, backlog ASP, market mix (less West Coast), and diverse buyer exposure," the analysts added.

Oppenheimer believes PHM has a favorable geographic mix, with only 18% of FY22 revenue from the western U.S., the lowest in the sector. This is said to be a positive for the company, given indications of relatively softer trends in these markets.

"We also see upside to the consensus 2023 EPS estimate, currently 35% lower than at this time last year. We highlight $0.38 of incremental upside to our $7.85 estimate (the Street, $7.50E) based on higher closing ASP and margin," concluded the analysts.

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