We issued an updated research report on PulteGroup Inc. PHM on May 3, 2016. On Apr 21, Pulte posted robust first-quarter 2016 results with both its earnings and sales beating the Zacks Consensus Estimate. Adjusted earnings of 24 cents per share surged 60% year over year on the back of higher home sales, slightly higher-than-expected gross margins and an improved SG&A ratio. Reduced share count and a lower-than-expected tax rate also boosted earnings. Home sales rose 28% as overall demand trends remained positive. Management noted that traffic and demand trends were positive across the country during the quarter as well as the first few weeks of April. According to management, the spring selling season is off to a ‘‘good’’ start. The momentum is expected to remain positive through the rest of the year amid an improving economy, rising wages, favorable job outlook and a tight supply situation. Pulte enjoys strong fundamentals including a large-scale business and geographic/product diversity, consistently improving profitability, commitment to drive higher returns while pursuing a more balanced capital allocation approach. We believe that Pulte will do well in 2016 by benefiting from the steadily improving housing market, prudent land investments, focus on high-return business and the recent Wieland acquisition. Pulte acquired the homebuilding assets of privately owned John Wieland Homes and Neighborhoods (“Wieland”), an Atlanta-based move-up and luxury home builder, in January this year. The Wieland buyout has strengthened Pulte’s position in the Southeastern housing market. However, broader housing market headwinds – increasingly competitive environment and cost inflation amid moderating home price gains – and the mild slowdown in sales trends in Texas remain concerns. Pulte’s Texas segment accounts for around 15% of its homebuilding revenues. Orders in this market declined 9% last year but were flat in the first quarter of 2016.Texas’ economy is dependent on the oil complex and the volatility in the energy sector has been hurting the region’s overall economic growth and in turn, home sales. Despite overall housing demands remaining positive, management warned that labor supply – which was tight in the quarter – is expected to remain tight through the rest of the year. Also, the public battle between the board and the Pulte family can create organizational uncertainty. In April, the company’s largest shareholder, William J. Pulte made public a letter to the board of directors that recommended the immediate removal of the long-time CEO, Richard Dugas, and a change in the company’s direction. Pulte also demanded that lead independent director, James J. Postl, resign immediately from all his positions in the company. Pulte expressed his displeasure over the company’s announcement that Dugas will retire as Chairman and CEO in May next year and hence, requested the board to accelerate the aforesaid process. Bill Pulte, his grandson, and another board member, Jim Grosfeld, criticized Dugas’ decision to move the company’s headquarters to Atlanta as well as change its overall performance strategy. In response, Postl issued an open letter to shareholders stressing the board’s strong support for Dugas and the company’s value creation strategy which “has produced significantly higher profitability and shareholder returns.” Pulte holds a Zacks Rank #2 (Buy). Other homebuilders worth considering are NVR, Inc. NVR, KB Home KBH and D.R. Horton, Inc. DHI. All the three have the same rank as Pulte. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report PULTE GROUP ONC (PHM): Free Stock Analysis Report KB HOME (KBH): Free Stock Analysis Report D R HORTON INC (DHI): Free Stock Analysis Report NVR INC (NVR): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research