UPDATE: Goldman Sachs Resumes PulteGroup at Sell on Slower Growth Markets

In a report published Monday, Goldman Sachs analyst Eli Hackel resumed coverage on PulteGroup PHM with a Sell rating and $18.00 price target.

In the report, Goldman Sachs noted, “We resume coverage of PulteGroup with a Sell rating and 4% downside to our 12-month target price of $18 (vs. 9% upside for coverage). We see growth lagging peers during the recovery driven by two factors: (1) Pulte ranks near the tail end of our geographical exposure matrix with presence in slower growing markets like Washington DC, Baltimore, and New York, and (2) Pulte's strategy is to consolidate rather than grow during the next few years by spending less on land and not entering new markets. We believe that Pulte has successfully transitioned on its operational turnaround after its acquisition of Centex Corp. However, the company has spent minimally on land acquisitions since 2009 and continues to shrink its balance sheet. This approach may have merit given large investments during the last cycle that need to be worked down, but it will also likely hamper growth, which is what we expect will outperform. While shrinking the balance sheet Pulte is focused on improving margins and returns. There should be a benefit to gross margin as the company is now rolling in its re-engineered homes that carry a higher gross margin, but the full impact will take time and likely puts the company on the same footing as other builders.”

PulteGroup closed on Friday at $18.87.