Strength Seen in PulteGroup (PHM): Can Its 4.2% Jump Turn into More Strength?

PulteGroup PHM shares rallied 4.2% in the last trading session to close at $126.96. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 4.8% gain over the past four weeks.

PHM stock is likely to have gained on the back of an improving macroeconomic backdrop and stronger investor sentiment toward homebuilder stocks. The Federal Reserve's decision to keep its benchmark interest rate unchanged at 3.5%-3.75% likely boosted confidence in the housing sector. Additionally, mortgage rates eased to 6.47% for the week ended June 18 from 6.52% a week earlier, according to Freddie Mac, providing further support for homebuilder stocks.

This homebuilder is expected to post quarterly earnings of $2.43 per share in its upcoming report, which represents a year-over-year change of -19.8%. Revenues are expected to be $4.03 billion, down 8.5% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For PulteGroup, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on PHM going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

PulteGroup belongs to the Zacks Building Products - Home Builders industry. Another stock from the same industry, D.R. Horton DHI, closed the last trading session 3.5% higher at $157.81. Over the past month, DHI has returned 7.6%.

For D.R. Horton, the consensus EPS estimate for the upcoming report has remained unchanged over the past month at $2.98. This represents a change of -11.3% from what the company reported a year ago. D.R. Horton currently has a Zacks Rank of #3 (Hold).

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This article originally published on Zacks Investment Research (zacks.com).

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