By Shaina Mishkin and Mackenzie Tatananni

Shares of PulteGroup rose on Tuesday after the home builder reported first-quarter earnings that topped expectations, even as management pointed to heightened economic uncertainty.

PulteGroup reported earnings of $2.57 a share, down from $3.10 a year earlier but above the $2.43 analysts expected, according to FactSet. Revenue of $3.7 billion fell slightly below the $3.8 billion Wall Street expected and marked a 2% decrease from the prior year.

Management said the figure represented a combination of a 6% increase in sales prices to $570,000, offset by a 7% decrease in closing volume to 6,583 homes in the quarter.

"As the quarter progressed, buyers responded favorably to interest rate declines, but consumers remain caught between a strong desire for homeownership and the affordability challenges of high selling prices and monthly payments that are stretched," CEO Ryan Marshall said in a statement.

PulteGroup shares were up 3.7% shortly after the market opened.

The company's stronger-than-expected margin is of particular note for investors. PulteGroup's home sale gross margin, at 27.5%, was better than the 26.9% expected by FactSet consensus estimates.

"For the bulls, we believe the gross margin beat versus consensus and the 6% [year-over-year] gain in closing prices should be talking points, " wrote Wedbush analyst Jay McCanless in a research note after the earnings.

Home buyers took advantage of a drop in mortgage rates during the quarter ended March 31, Marshall said on a conference call discussing earnings. "However, the quarter also saw consumers continuing to face affordability challenges," he added. "These headwinds have only been exacerbated recently by growing concerns about the potential for a slowing economy."

In a weaker market for selling homes, builders face a difficult choice. Leaning on incentives to spur demand means pressure on margins, while those who refrain from such offers may see sales slow. Roughly three in five builders in April told the National Association of Home Builders that they offered incentives, while 29% cut prices.

PulteGroup has "developed and deployed a variety of tools to help consumers overcome their personal homeownership hurdles," including a program offering buyers below-market-rate mortgages. "We leaned into incentives a little more heavily in the first quarter as we executed on our plan to reduce excess [speculative] inventory," Marshall said.

PulteGroup offered more sales incentives in the quarter, Marshall said. But the builder pulled back on speculative construction -- a home building strategy that involves beginning construction on a home before a buyer is identified -- at the same time.

"The goal in aggressively managing our production pipeline is to more effectively balance the need to have units available to meet immediate buyer demand while still selling from a position of strength," Jim Ossowski, PulteGroup's chief financial officer, said on the call. "In the current environment, we believe prioritizing price and margin over volume makes most strategic sense."

Macroeconomic changes have affected consumers at a range of price points, Marshall said. "Whether it's the volatility in the stock market, concerns about tariff-induced inflation, the fluctuation in interest rates, or the growing talk of recession, demand in April has been more volatile and less predictable day-to-day."

In its second quarter, the company expects to close the sales of 7,400 to 7,800 homes with a gross margin from 26.5% to 27% -- in line with the 7,648 closings analysts expect but a higher than-expected-margin, according to FactSet. It anticipates 29,000 to 30,000 closings in 2025, shy of the 30,121 consensus expected.

"Given the structural shortage of housing, we remain constructive on long-term housing demand, and are adapting to the short-term impacts on consumer demand resulting from greater economic and financial uncertainty," Marshall said.

PulteGroup isn't the only builder investors will hear from this week. The home building companies Taylor Morrison, Meritage, Century Communities, and Tri Pointe are all expected scheduled to release their results. Separately, the National Association of Realtors is scheduled to release data on March sales of existing homes at 10 a.m. Eastern on Thursday.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 22, 2025 09:52 ET (13:52 GMT)

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