Morningstar | We're Encouraged by Improving Demand Trends for PulteGroup's Homes During Spring Selling Season
After years of underperformance relative to peers, PulteGroup unveiled a strategic plan in 2010 to drive improved and sustainable returns on invested capital. A more disciplined approach to land acquisition and inventory management, combined with other initiatives across sales, marketing, and home construction, has contributed to the company's improved ROICs since the strategic plan was announced.The housing market continues to recover from the 2009 bottom, albeit at a measured pace. We believe favorable demographics coupled with the realization of pent-up demand will drive a continued gradual housing recovery through the mid-2020s, with annual housing starts reaching over 1.4 million units. We expect that first-time buyers and revitalized move-up activity will stimulate future housing demand, and PulteGroup is well positioned to capture these potential buyers with its Centex and Pulte Homes brands. In addition, PulteGroup’s active-adult product, Del Webb, should benefit from the aging baby boomer population. We believe that increased new-home demand, coupled with the company’s renewed focus on returns, should result in solid earnings growth and allow the company to achieve returns in excess of its cost of capital.PulteGroup through its subsidiaries is engaged in the homebuilding business. The company also has mortgage banking operations, conducted principally through its susidiary, Pulte Mortgage LLC, and title and insurance brokerage operations. The company's homebuilding business includes the acquisition and development of land primarily for residential purposes within the United States. The company provides a variety of home designs, including single-family detached, townhouses, condominiums, and duplexes at different prices and with varying levels of options and amenities to its customer groups: first-time, move-up, and active adult.
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