Wednesday's IBD 50 Stocks To Watch pick, PulteGroup, is among the best stocks to buy and watch as it breaks out past its latest buy point. PHM stock is in buy range Wednesday, as it rose 0.4% midday.
Atlanta's PulteGroup is America's third-largest homebuilder based on the number of completed home sales. Pulte builds single-family detached homes, mostly in Florida and in the western states.
On Jan. 31, the homebuilder reported better-than-expected Q4 top and bottom lines, earning $3.85 per share on sales of $5.17 billion. Earnings jumped 48% on a year-over-year basis while sales climbed 19%. The strong results sparked a 9.4% surge in the stock price.
Earnings are forecast to crater for a few quarters for PulteGroup and other homebuilders but investors are looking to 2024. Housing markets have stayed resilient, perhaps because millennials have entered their nesting phases, underpinning strong demand for larger living spaces..
In 2022, the housing market got hammered by higher mortgage rates, which jumped to a two-decade high above 7%, from 3% at the end of 2021. Fortunately, mortgage rates have come down since that time.
Housing Leader's Impressive Earnings Record
This housing leader has a perfect 99 Earnings Per Share Rating, according to IBD Stock Checkup. This metric takes into account growth and stability of earnings over the past three years, with the two most recent quarters weighed more heavily.
PulteGroup also has an impressive long-term earnings track record, with a solid 32% five-year growth rate. This positively impacts the EPS Rating, which reflects 48% earnings growth in the latest two quarters. Annual earnings are expected to fall 32% in 2023 and another 6% in 2024, according to FactSet. However, those numbers could be revised higher.
As for the SMR Rating — which looks at sales, profit margins and return on equity — Pulte has a strong "A" rating. In the latest year, it booked a strong 21% pretax margin, with a great 31% return on equity. And over the last three quarters, Pulte has grown sales by an average 16%.
Finally, PHM stock shows a 98 out of a perfect 99 IBD Composite Rating. This proprietary metric is designed to help investors easily measure the quality of a stock's fundamental and technical metrics.
Best Stocks To Buy And Watch: PulteGroup In Buy Zone
Pulte shares rose 0.4% Wednesday, adding to Tuesday's breakout gains past a 59.34 cup-with-handle buy point, according to IBD MarketSmith. The 5% buy zone tops out at 62.31. In recent weeks, shares also found support around their 10-week moving average line.
Bullishly, the relative strength line hit a new high on the breakout day, resulting in the Blue Dot. The designation — which appears in a MarketSmith screen — focuses on ideas with market-beating performance. They could be big winners amid the ongoing confirmed uptrend in stocks.
Fellow homebuilder D.R. Horton broke out past a 99.50 buy point in a cup with handle during Tuesday's gains. DHI stock was Tuesday's IBD Stock Of The Day. Meanwhile, Meritage Homes, which also broke out this week, is an IBD Leaderboard stock.
Other IBD 50 Stocks To Watch
These are three recent IBD 50 Stocks To Watch picks.
| Company | Symbol | Buy point | Type of base |
|---|---|---|---|
| O'Reilly Automotive | 874.04 | Cup base | |
| ServiceNow | 494.72 | Cup base | |
| Xponential Fitness | 30.80 | Ascending base |
Source: IBD Data As Of April 12, 2023
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on the best stocks to buy and watch and the stock market.
