Zacks
0
All posts from Zacks
Zacks in Our Research. Your Success.,

Pulte CEO to Retire under Pressure from Founder for Change

The founder and largest shareholder of PulteGroup, Inc. PHM, William J. Pulte sent a letter to the company’s board of directors on Monday recommending the immediate removal of long-time CEO Richard Dugas.

Earlier in the day, the homebuilder issued a press release announcing that Dugas has informed the board of his intention to retire as Chairman and CEO effective May 2017. His decision was in response to Pulte, his grandson and another board member, Jim Grosfeld’s demands for a CEO change. Dugas agreed to step down to avoid “a contested public battle” which would be against shareholders’ interests. However, in his letter, the founder expressed disappointment with the year-long succession plan and asked the board to accelerate the process.

Shares declined 6.6% in response to the news.

The company’s insignificant stock price appreciation since Dugas’ appointment, irresponsible laying off of key employees and the costly shift of headquarters from suburban Detroit to Atlanta were some of the reasons behind the demand. PulteGroup’s sales have been rather soft compared with other homebuilders despite the steady recovery in the housing market.

In addition, the board decided not to nominate James Grosfeld as a candidate for the position for director at the upcoming annual general meeting because of his differing views with other independent directors. Grosfeld, former Pulte CEO, joined the board last December on Pulte’s request, who strongly criticized the decision.

Dugas has been with the company for more than two decades and served as the CEO for the last 13 years. While the board strongly supports Dugas, Pulte feels that he has shown “lack of performance and repeated bad decision-making”.

The board has formed a special committee to conduct a comprehensive search for a successor.

PulteGroup carries a Zacks Rank #3 (Hold). A couple of homebuilders worth considering are KB Home KBH and Hovnanian Enterprises Inc. HOV. Both have a Zacks Rank #2 (Buy). In the broader construction sector, Headwaters Incorporated HW sporting a Zacks Rank #1 (Strong Buy) is worth a look.

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
 
HEADWATERS INC (HW): Free Stock Analysis Report
 
PULTE GROUP ONC (PHM): Free Stock Analysis Report
 
KB HOME (KBH): Free Stock Analysis Report
 
HOVNANIAN ENTRP (HOV): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research