Wednesday, May 20, 2009

Buying at Home Builder May Indicate Floor

Pulte's homes are toward the higher end of the market, which makes them a difficult sell in a tough economy, says Wall Street Strategies analyst David Urani, who rates the company at Hold. The company's operating margins fell precipitously in the quarter, and the company did not make a big enough dent in its debt load, he says. Pulte recently agreed to merge with Centex (the deal is expected to close in the third quarter), which builds lower-end homes. After the merger the new company will become the largest builder in the nation, but both companies are still reeling from the housing bust, Urani says.

"Right now, both companies are dealing with big losses," he says. "I can't see a whole lot driving up [Pulte's stock price] from here given the recent run-up in the stocks."