Outlook good for Las Vegas home builder

Thursday, July 24, 2003 | 10:59 a.m.

SUN STAFF AND WIRE REPORTS

BLOOMFIELD HILLS, Mich. -- Pulte Homes Inc., the fourth-largest U.S. homebuilder and the second-largest in Las Vegas, raised its 2003 earnings forecast after profit in the second quarter advanced a greater-than-expected 35 percent as record low mortgage rates fueled home sales.

Pulte, based in Michigan, expects to earn between $9 and $9.25 a share this year, the company said in a statement. That compares with a forecast of $8.15 to $8.45 at the end of its first quarter and the $8.37 expected by analysts.

In Las Vegas, Pulte builds and develops under the Pulte and Del Webb brands.

Homebuyers are taking advantage of borrowing costs at 45-year lows, benefiting Pulte and larger rivals Centex Corp. and Lennar Corp. Sales of new single-family homes will grow to 1 million in 2003 from last year's record 973,000, according to the Washington-based National Association of Realtors.

"New-home sales in the first half surpassed all expectations because the mortgage rates hit rock bottom," said Lawrence Yun, an economist at the association. "Even with some mild pullback in the second half, it still comes out to a record year."

Profit from operations at Pulte was $122 million, or $1.95 a share, compared with $90.4 million, or $1.45, in the same period a year earlier, Roger Cregg, the company's chief financial officer, said on a conference call with investors and analysts.

Pulte was expected to earn $1.74 a share, according to the average estimate in a Thomson Financial poll. Revenue rose 16 percent to $1.96 billion, compared with an expected $1.86 billion.

Shares in the company jumped as much as 5 percent today, the biggest gain in six weeks, and were up $2.92 to $62.93 in New York Stock Exchange composite trading as of 10:10 a.m.

They are up 29 percent this year and give the company a stock market value of about $3.7 billion, placing it behind Lennar, Centex and D.R. Horton, according to Bloomberg data.

The company, which builds across the United States, sold 7,112 homes in the United States during the quarter, a gain of 7.9 percent from the year-ago period.

The average home price rose 8.5 percent to $259,486. U.S. home orders rose 11 percent to 9,191 and the total backlog of homes ordered and not yet delivered rose 17 percent to 15,199.

Dallas-based Centex said this week net income for the three months to June 30 surged 63 percent to $142.8 million, or $2.23 a share. Lennar posted a 51 percent increase in profit for the three months to May 31 and boosted its forecast for 2003.

The average rate for a 30-year fixed mortgage reached a low of 5.21 percent in June, according to Freddie Mac, the No. 2 U.S. mortgage buyer. This year, the rate probably will average 5.7 percent, compared with 6.5 percent in 2002, according to the Mortgage Bankers Association of America.