Pulte Homes Is Not 'Boring': Analyst Who Now Says Buy Explains Why

PulteGroup Inc. PHM, under the leadership of CEO Ryan Marshall, has ousted a second executive.

Wolfe Research now expects the company to generate an operating cash flow of more than $2.3 billion in 2023, on a market cap of merely $12.5 billion. That should drive a net cash position of $2 per share by yearend after $750 million of share repurchases.

The Analyst: Truman Patterson says he finds "little boring in this [company's] story." He then upgraded the rating for PulteGroup from Peer Perform to Outperform, while establishing a price target of $64.

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The Thesis: PulteGroup is expected to “consistently generate” a gross margin that is 300-to-400 basis points higher than the peer average throughout 2023, “while sporting one of the healthiest Balance Sheets in the group,” Patterson said in the upgrade note.

“We believe 'balance' is the appropriate word when describing PHM, from its consumer segmentation and Spec/BTO strategy to its steady capital allocation and highly profitable land/operating philosophy,” the analyst wrote.

“We expect PHM will generate the highest ’23 ROA in the group (ex NVR) at nearly 11.0%, yet the equity still trades at an attractive 7.5X ’23 PE (30% discount to the group),” he added.

PHM Price Action: Shares of PulteGroup had risen by 2.27% to $57.20 at the time of publication Thursday.