Pulte Homes Inc

raised its forecast for efficiencies and savings from its acquisition of rival Centex Corp, overshadowing a quarterly loss and sending its shares up 7.5 percent.

The biggest U.S. homebuilder also reported higher gross margins in the third quarter.

Pulte, which has operations in 29 states, said its new target for efficiencies and savings from its purchase of Centex is $440 million, up 25 percent from its prior estimate.

The enhanced boost from the merger as well as higher-than-expected gross margins and lower-than-expected impairments make the third-quarter results a positive for the company, J.P. Morgan analyst Michael Rehaut wrote in a note to clients.

Pulte shares were up 69 cents, or 7.5 percent, to $9.92 in morning trading on the New York Stock Exchange, a new 12-month high.

Pulte's third-quarter gross margins of 13.1 percent, excluding interest, merger costs and impairments, were up from the second quarter and were solidly higher than Rehaut's 11.2 percent estimate.

But the Bloomfield, Michigan-based company still lost money, reporting a quarterly loss of $1.15 per share, or $361.4 million, far worse than analysts' average forecast of a loss of 69 cents per share, according to Thomson Reuters I/B/E/S.

Another source of comfort for investors: Pulte retired $1.7 billion of debt in the quarter, more than Fox-Pitt analyst Robert Stevenson had expected.

These results are not horrific, but some investors were expecting the worst, Stevenson said.

Still, the housing industry is still challenged by conditions including broad economic weakness, foreclosures and rising unemployment, despite some signs of stabilization, Chief Executive Richard Dugas said.

As of the end of September, Pulte fell out of compliance with its a credit facility covenant. Its banks granted it a waiver until December 15. It said that if it cannot reach a new agreement or extend the waiver, it has enough cash to go without the facility.

(Reporting by Helen Chernikoff, Editing by Maureen Bavdek and John Wallace)

Michigan