PulteGroup stock prediction after mixed third-quarter results

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Oct 26, 2021
  • PulteGroup shares on Tuesday plunged by nearly despite posting solid FQ3 results.
  • The company announced its most recent quarterly results before markets opened, beating analyst estimates.
  • However, its backlog value increased by 56% to more than $10 billion amid supply chain difficulties.

On Tuesday, PulteGroup Inc. (NYSE:PHM) shares fell by nearly 4% after announcing its most recent quarterly results. The company reported its fiscal third-quarter revenue and earnings before markets opened, beating the consensus for Street expectations. However, the backlog value increased substantially from the same period a year ago amid persistent supply chain issues.

PulteGroup posted FQ3 non-GAAP earnings per share of $1.82, slightly outperforming the consensus analyst estimate of $1.79. In addition, its GAAP EPS of $1.82 was also $0.04 ahead of estimates, while revenue for the quarter grew by 18% to $3.48 billion, surpassing the average analyst estimate by $50 million.

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The company’s backlog increased by a whopping 56% to a value of $10.3 billion.

PulteGroup looks undervalued

From an investment perspective, PulteGroup shares trade at compelling 12-month trailing and forward P/E ratios of 7.79 and 5.27, respectively making the stock an attractive option for value investors.

In addition, analysts expect its earnings per share to grow by 41.60% this year, before rising at an average annual rate of 18.10% over the next five years. Therefore, the stock could also gain the attention of growth investors.

Source – TradingView

Technically, PulteGroup shares seem to have recently plummeted to complete a downward breakout from an ascending channel formation. However, the stock is yet to reach the oversold conditions of the 14-day RSI, thus leaving room for more downward movements.

Therefore, with investors seemingly unwilling to bet on its exciting growth prospects and compelling valuation multiples, they could target extended post-earnings declines at about $46.00 or lower at $44.25.

On the other hand, $49.67 and $51.59 are crucial resistance levels.

Is it safe to buy PHM shares?

In summary, although PulteGroup shares appear to have plunged significantly following Tuesday’s earnings report, the stock is yet to reach oversold conditions.

Therefore, although the stock trades at a cheap valuation whilst offering exciting growth prospects, it may be best to wait for shares to retest current support levels.

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