What Results from PulteGroup and Herc Tell Us About Several Portfolio Names
Earnings conference call comments are even more critical this time around.
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With the pace of earnings reports picking up this week, let’s dig into the latest quarterly reports from equipment rental company Herc Holdings HRI and homebuilder PulteGroup PHM and see what they tell us.
Herc Holdings
For the March quarter, equipment rental company Herc posted a 7% increase in its top line beating the market consensus forecast, which included a 3% gain in equipment rental revenue. Herc reiterated its 2025 equipment revenue growth forecast of 4%-6%, calling out federal and private funding for large construction projects such as data centers, manufacturing onshoring, and infrastructure projects. Pretty much, Herc reiterated the comments we shared with you from Eaton’s ETN 2025 Investor Day regarding mega construction backlog and activity prospects.
We’ll look for more on Herc’s earnings call this morning, but our initial reaction is its outlook supports not only ETN shares but those for United Rentals URI and Vulcan Materials VMC. While the inclination for some members may be to wade into URI shares following Herc’s earnings report, the prudent play, in our view, is to hold off until we’ve collected Herc management’s full comments. Better to be safe than sorry, especially since some earnings press releases contain less information than others.
What we learn in full will set the tone for URI's quarterly results after Wednesday’s market close and its earnings conference call at 8:30 a.m. ET Thursday morning.
PulteGroup
The homebuilder's home sales revenue for the March quarter fell 2% year over year as a 7% decline in the number of homes closed during the quarter to 6,583 units more than offset the 6% year-over-year increase in the average sales price to $570,000. Looking sequentially, however, we see an even steeper decline in home revenue and closings from $4.7 billion and 8,103 homes.
Net new orders for the first quarter totaled 7,765 homes, and that too was lower compared to 8,379 homes in the year-ago quarter. However, given the year-over-year climb in average home prices, the value tied to that new order level for the March 2025 quarter dipped modestly year over year to $4.5 billion. That order level benefited in part from lower mortgage rates that emerged during the March quarter — from the a tad over 7% to 6.6%. We’ve since seen mortgage rates inch back up as the Fed signaled a likely slower pace of additional rate cuts as it digests incoming tariff-impacted inflation data.
We see the combination of rising home prices and the rebound in mortgage rates being a drag on new home order activity in the current quarter. That activity also faces the headwind of consumers being more selective in their spending and the sharp increase in announced layoffs in the February and March Challenger Job Cuts Report.
When we listen to Pulte management on this morning’s earnings call, we’ll be interested in its comments on lumber costs and the expected impact on margins. We will also be listening to see how it sees its backlog playing out over the coming quarters, and whether Pulte is accelerating its adoption of modular products like those supplied by Bullpen resident Builders FirstSource BLDR.
At the time of publication, TheStreet Pro Portfolio was long ETN, URI and VMC.
