PulteGroup, Inc., Atlanta (NYSE:PHM) on Tuesday reported net income of $178 million, or $0.58 per share. for its third quarter ended September 30, 2017. The gain, which included an insurance related charge of $5 million, compared with net income of $128 million, or $0.37 per share in the prior-year quarter. Earnings per share missed analyst expectations of a gain of $0.59.
Home sale revenues for the third quarter increased 9% over the prior year to $2.1 billion. Higher revenues for the period were driven by a 2% increase in deliveries to 5,151 homes, combined with a 7%, or $25,000, increase in average sales price to $399,000.
Home sale gross margin for the third quarter was 23.9%, down 80 basis points from the prior year, but is up 50 basis points from the second quarter 2017 adjusted gross margin of 23.4%. Home building SG&A expense for the quarter of $237 million, or 11.6% of home sale revenues, included a $5 million charge associated with the resolution of certain insurance matters. Prior year SG&A of $251 million, or 13.3% of home sale revenues, included approximately $12 million of charges for certain restructuring costs and shareholder activities.
Net new orders for the third quarter increased 11% to 5,300 homes, while the value of new orders increased 23% over the prior year to $2.3 billion. The company operated out of 778 communities for the third quarter, which is up 10% over the third quarter of 2016.
Ending backlog for the quarter was up 15% over the prior year to 10,823 homes, as backlog value gained 26% to $4.7 billion. The average price of homes in backlog increased 10% over the prior year to $431,000, which is a 10 year high for the company.
The company’s financial services operations reported third quarter pretax income of $18 million compared with $21 million in 2016. The decrease in pretax income for the period was primarily the result of a more competitive operating environment which impacted pricing during the period. Mortgage capture rate for the quarter was 80%, compared with 81% in the prior year.
“We continue to be extremely pleased with the strength of homebuyer demand and the sustained course of the housing recovery,” said Ryan Marshall, President and CEO of PulteGroup. “Despite the disruptions caused by Hurricanes Harvey and Irma, our 11% increase in year-over-year orders for the quarter points to the health of the market, while the 15% increase in our backlog puts us in an excellent position to deliver strong fourth quarter and full-year financial results.”
“Fueled by growing demand among first-time buyers and supported by a strong economy, high employment, and historically low interest rates, U.S. new home sales for 2017 are expected to grow a healthy 5% to 10% over last year,” added Marshall. “We remain optimistic about the strength of future housing demand, as the current housing cycle moves into its seventh year of growth.”