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Meritage Homes and United Airlines highlighted as Zacks Bull and Bear of the Day
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For Immediate Release
Chicago, IL – January 31, 2022 – Zacks Equity Research Shares Meritage Homes Corp. (MTH - Free Report) as the Bull of the Day, United Airlines (UAL - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Meta Platforms , Amazon (AMZN - Free Report) and Apple (AAPL - Free Report) .
Meritage Homes Corp. expects to see another strong year in 2022. This Zacks Rank #1 (Strong Buy) is trading at just 4.3x forward earnings because the Street thinks higher mortgage rates are going to hit home buying demand.
Will it?
Meritage Homes is a national home builder which builds first-time and move-up homes in the hottest housing markets, including Arizona, California, Colorado, Texas, Florida, Georgia, North Carolina, South Carolina and Tennessee.
Another Beat in Q4
On Jan 27, Meritage reported its fourth quarter 2021 results and beat on the Zacks Consensus by 3.5%. Meritage reported earnings of $6.25 versus the consensus of $6.04.
That's earnings growth of 57% versus the fourth quarter of 2020 where Meritage made just $3.97.
It was the 13th beat in a row. Meritage has only missed once in the last 5 years and it was in 2018.
That's an impressive streak, especially during a pandemic which temporarily closed sales centers in 2020.
But the housing market came roaring back from the start of the pandemic and remains as hot as ever.
In the fourth quarter, entry level made up 79% of community counts and 82% of all orders. Meritage is in the sweet spot of appealing to Millennials, and increasingly, GenZ buyers.
As supply chain issues hit, building times were lengthened. Backlog rose to 5,679 homes from 4,672 last year.
Fourth quarter 2021 was the best fourth quarter ever for sales orders.
It also saw the highest home closing gross profit, up 29% to $434.7 million. Home closing gross margins, a key barometer for the home builders, also jumped 500 basis points to 29% from 24% last year.
For the full-year, gross margins were up 580 basis points to 27.8% from 22% in 2020, a cycle high.
The Strong Demand Continued into 2022
On the conference call Meritage said that it saw the strong demand from 2021 continue into 2022.
The 50 basis point move in the average 30-year fixed mortgage rate over the last few weeks was not deterring home buyers. On the contrary. The possibility of even further rise in mortgage rates has brought out even more buyers.
Promotional incentives remain low as they are still metering some communities and what they release is selling almost immediately in many locations.
2022 Another Year of Growth
The Street has been operating under the assumption that 2021 was "peak" earnings for the home builders. After all, how much hotter could it get?
But the Street has been wrong about underlying demand.
Meritage guided an earnings range of $23.15 to $24.65 for 2022. That's more bullish than the current Zacks Consensus of $23.44.
Here's the earnings outlook for the last 3 years:
2020: $11.00 2021: up 75% to $19.29 2022: analysts expect it to be up 21.5% to $23.44
Analysts are expecting flat growth for 2023, but that's not surprising given all the balls in the air with inflation and possible mortgage rate increases. The analysts are playing it safe on 2023 for now.
Shares Fall 18% to Start 2022
Despite all the good news, investors have still been selling Meritage in 2022.
Shares have been on a wild roller coaster the last 6 months, but have taken a decidedly negative turn in 2022, falling 18% year-to-date.
They are dirt cheap, with a forward P/E of just 4.3.
Meritage doesn't pay a dividend, but it's been using some of its extra free cash flow to buy back shares. In 2021, it bought back 64,000 shares for $61 million.
Meritage expects its higher gross margins to remain intact in 2022. It is forecasting full-year of 27.75%.
Is the Street getting the home builders wrong again in 2022?
For those who think the answer is "yes," Meritage is one to keep on your short list.
United Airlinesis getting hit in 2022 by the Omicron outbreak, but this Zacks Rank #5 (Strong Sell) is still on track for positive earnings for the year.
United Airlines is an international airline headquartered in Chicago. It has the most comprehensive route network among North American carriers, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C.
A Big Beat in Q4 2021
On Jan 19, United reported fourth quarter results and easily beat the Zacks Consensus Estimate. Earnings were a loss of $1.60 compared to the estimate of a loss of $2.23.
That was a 28.3% beat.
It was United Airlines third consecutive beat in a row.
However, fourth quarter capacity was still down 23% compared to the fourth quarter of 2019, which was pre-pandemic.
The Recovery in the Airlines is Delayed
It's been over a year since the vaccines rolled out in the United States and most thought that travel would have returned close to its pre-pandemic level by now.
But business travel remains low and the Omicron outbreak hit demand.
United now expects full year 2022 capacity to be lower than 2019, but it will still be increasing capacity, just later in the year due to Omicron. The Omicron outbreak is hitting.
However, in better news, United has seen strong bookings for spring and beyond.
It will unground 52 Pratt & Whitney-powered Boeing 777s as demand returns throughout the year. But it means it will fly fewer available seat miles (ASMs) in 2022 than 2019.
Outlook for Q1 and Full Year 2022 Disappoints
With Omicron hitting, United forecast that first quarter capacity would be down 16% to 18% compared to the first quarter of 2019.
For the full year, capacity is expected to be down versus 2019.
As a result, the analysts have cut their 2022 earnings estimates.
4 estimates were cut in the last week, pushing down the 2022 Zacks Consensus Estimate to $0.59 from $1.40 in the last week.
That's still earnings growth of 104% as the company lost $13.94 in 2021.
2023 is looking even better, fingers crossed, with earnings expected to soar 1085% to $6.99.
Shares Still Under Perform
The airline stocks sold off big when the coronavirus hit. Warren Buffett even famously sold off all of his airline stocks soon after the March 2020 plunge.
Like other stocks, they had a rebound in 2020, but shares are up just 7.2% over the last year.
In some good news for investors, they haven't plunged as badly as other stocks in 2022. Shares are down just 2.2% this year.
On a P/E basis, the shares aren't cheap at 69x.
But if you believe that travel really will rebound later this year, then United is one you might want to keep on your watch list.
Additional content:
What to Expect When Meta Platforms Reports Q4 Earnings
During the to-be-reported quarter, Facebook rebranded itself as Meta Platforms to focus on Metaverse.
Meta expects total revenues between $31.5 billion and $34 billion for the fourth quarter of 2021.
The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $33.04 billion, indicating an increase of 17.68% from the year-ago quarter’s reported figure.
The consensus mark for fourth-quarter earnings is pegged at $3.78 per share, unchanged in the past 30 days, suggesting a decline of 2.6% from the figure reported in the year-ago quarter.
The company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 19.84%.
Let’s see how things are shaping up for the upcoming announcement.
Factors to Consider for Q4 Earnings
Beginning fourth-quarter 2021, Meta will report revenues and income (loss) from operations for the following two segments: Family of Apps (FoA) and Reality Labs (“RL”).
FoA includes Facebook, Instagram, Messenger, WhatsApp and other services. RL includes augmented and virtual-reality-related consumer hardware, software and content.
Usage of Meta’s services is expected to have remained strong despite increasing regulatory headwinds in the fourth quarter. This is likely to have driven top-line growth in the to-be-reported quarter.
The Zacks Consensus Estimate for fourth-quarter MAUs worldwide is pegged at 2.965 billion, suggesting 6% growth from the figure reported in the year-ago quarter. Moreover, DAUs worldwide is pegged at 1.953 billion, indicating 5.9% growth from the figure reported in the year-ago quarter.
An improved ad-spending environment, as well as accelerated digital shift, is expected to have driven Meta’s ad revenues in the to-be-reported quarter. The company’s top line is likely to have gained from improving market share, driven by a growing user base and continuing innovation in ad products.
According to an e-Marketer report, U.S. digital ad spending is estimated to be more than $200 billion in 2021. Meta, along with Google and Amazon, will make up 64% of this digital spending.
However, changes made by Apple and Google in their mobile operating systems and browser platforms have limited Meta’s ability to track user-activity trend.
Moreover, stiff competition from Google, Amazon and others for ad-dollars remains a headwind.
Snap is noteworthy given its rising popularity among Gen Zowing to the immersive experience offered by the platform.
Snap’s flagship platform, Snapchat, reaches 75% of the 13-34 year-old population of the United States, making it a bigger platform than Meta’s Facebook and Instagram among this demography.
These factors are expected to have affected Facebook’s year-over-year advertising revenue growth rate in fourth-quarter 2021.
The consensus mark for this Zacks Rank #3 (Hold) company’s third-quarter advertising revenues is pegged at $32.59 billion, indicating 20% growth from the figure reported in the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Markedly, advertising revenues surged 33.2% year over year to $28.28 billion and accounted for 97.5% of third-quarter revenues.
Non-ad revenues are expected to decline significantly in the fourth quarter of 2021. Other revenues had surged 194.8% year over year to $734 million in third-quarter 2021.
The Zacks Consensus Estimate for Other revenues is pegged at $850 million, indicating 4% decline from the figure reported in the year-ago quarter.
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
As one investor put it, “curing and preventing hundreds of diseases…what should that market be worth?” This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Meritage Homes and United Airlines highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – January 31, 2022 – Zacks Equity Research Shares Meritage Homes Corp. (MTH - Free Report) as the Bull of the Day, United Airlines (UAL - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Meta Platforms , Amazon (AMZN - Free Report) and Apple (AAPL - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Meritage Homes Corp. expects to see another strong year in 2022. This Zacks Rank #1 (Strong Buy) is trading at just 4.3x forward earnings because the Street thinks higher mortgage rates are going to hit home buying demand.
Will it?
Meritage Homes is a national home builder which builds first-time and move-up homes in the hottest housing markets, including Arizona, California, Colorado, Texas, Florida, Georgia, North Carolina, South Carolina and Tennessee.
Another Beat in Q4
On Jan 27, Meritage reported its fourth quarter 2021 results and beat on the Zacks Consensus by 3.5%. Meritage reported earnings of $6.25 versus the consensus of $6.04.
That's earnings growth of 57% versus the fourth quarter of 2020 where Meritage made just $3.97.
It was the 13th beat in a row. Meritage has only missed once in the last 5 years and it was in 2018.
That's an impressive streak, especially during a pandemic which temporarily closed sales centers in 2020.
But the housing market came roaring back from the start of the pandemic and remains as hot as ever.
In the fourth quarter, entry level made up 79% of community counts and 82% of all orders. Meritage is in the sweet spot of appealing to Millennials, and increasingly, GenZ buyers.
As supply chain issues hit, building times were lengthened. Backlog rose to 5,679 homes from 4,672 last year.
Fourth quarter 2021 was the best fourth quarter ever for sales orders.
It also saw the highest home closing gross profit, up 29% to $434.7 million. Home closing gross margins, a key barometer for the home builders, also jumped 500 basis points to 29% from 24% last year.
For the full-year, gross margins were up 580 basis points to 27.8% from 22% in 2020, a cycle high.
The Strong Demand Continued into 2022
On the conference call Meritage said that it saw the strong demand from 2021 continue into 2022.
The 50 basis point move in the average 30-year fixed mortgage rate over the last few weeks was not deterring home buyers. On the contrary. The possibility of even further rise in mortgage rates has brought out even more buyers.
Promotional incentives remain low as they are still metering some communities and what they release is selling almost immediately in many locations.
2022 Another Year of Growth
The Street has been operating under the assumption that 2021 was "peak" earnings for the home builders. After all, how much hotter could it get?
But the Street has been wrong about underlying demand.
Meritage guided an earnings range of $23.15 to $24.65 for 2022. That's more bullish than the current Zacks Consensus of $23.44.
Here's the earnings outlook for the last 3 years:
2020: $11.00
2021: up 75% to $19.29
2022: analysts expect it to be up 21.5% to $23.44
Analysts are expecting flat growth for 2023, but that's not surprising given all the balls in the air with inflation and possible mortgage rate increases. The analysts are playing it safe on 2023 for now.
Shares Fall 18% to Start 2022
Despite all the good news, investors have still been selling Meritage in 2022.
Shares have been on a wild roller coaster the last 6 months, but have taken a decidedly negative turn in 2022, falling 18% year-to-date.
They are dirt cheap, with a forward P/E of just 4.3.
Meritage doesn't pay a dividend, but it's been using some of its extra free cash flow to buy back shares. In 2021, it bought back 64,000 shares for $61 million.
Meritage expects its higher gross margins to remain intact in 2022. It is forecasting full-year of 27.75%.
Is the Street getting the home builders wrong again in 2022?
For those who think the answer is "yes," Meritage is one to keep on your short list.
Bear of the Day:
United Airlinesis getting hit in 2022 by the Omicron outbreak, but this Zacks Rank #5 (Strong Sell) is still on track for positive earnings for the year.
United Airlines is an international airline headquartered in Chicago. It has the most comprehensive route network among North American carriers, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C.
A Big Beat in Q4 2021
On Jan 19, United reported fourth quarter results and easily beat the Zacks Consensus Estimate. Earnings were a loss of $1.60 compared to the estimate of a loss of $2.23.
That was a 28.3% beat.
It was United Airlines third consecutive beat in a row.
However, fourth quarter capacity was still down 23% compared to the fourth quarter of 2019, which was pre-pandemic.
The Recovery in the Airlines is Delayed
It's been over a year since the vaccines rolled out in the United States and most thought that travel would have returned close to its pre-pandemic level by now.
But business travel remains low and the Omicron outbreak hit demand.
United now expects full year 2022 capacity to be lower than 2019, but it will still be increasing capacity, just later in the year due to Omicron. The Omicron outbreak is hitting.
However, in better news, United has seen strong bookings for spring and beyond.
It will unground 52 Pratt & Whitney-powered Boeing 777s as demand returns throughout the year. But it means it will fly fewer available seat miles (ASMs) in 2022 than 2019.
Outlook for Q1 and Full Year 2022 Disappoints
With Omicron hitting, United forecast that first quarter capacity would be down 16% to 18% compared to the first quarter of 2019.
For the full year, capacity is expected to be down versus 2019.
As a result, the analysts have cut their 2022 earnings estimates.
4 estimates were cut in the last week, pushing down the 2022 Zacks Consensus Estimate to $0.59 from $1.40 in the last week.
That's still earnings growth of 104% as the company lost $13.94 in 2021.
2023 is looking even better, fingers crossed, with earnings expected to soar 1085% to $6.99.
Shares Still Under Perform
The airline stocks sold off big when the coronavirus hit. Warren Buffett even famously sold off all of his airline stocks soon after the March 2020 plunge.
Like other stocks, they had a rebound in 2020, but shares are up just 7.2% over the last year.
In some good news for investors, they haven't plunged as badly as other stocks in 2022. Shares are down just 2.2% this year.
On a P/E basis, the shares aren't cheap at 69x.
But if you believe that travel really will rebound later this year, then United is one you might want to keep on your watch list.
Additional content:
What to Expect When Meta Platforms Reports Q4 Earnings
Meta Platformsis set to report fourth-quarter 2021 results on Feb 2.
During the to-be-reported quarter, Facebook rebranded itself as Meta Platforms to focus on Metaverse.
Meta expects total revenues between $31.5 billion and $34 billion for the fourth quarter of 2021.
The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $33.04 billion, indicating an increase of 17.68% from the year-ago quarter’s reported figure.
The consensus mark for fourth-quarter earnings is pegged at $3.78 per share, unchanged in the past 30 days, suggesting a decline of 2.6% from the figure reported in the year-ago quarter.
Meta Platforms, Inc. price-eps-surprise | Meta Platforms, Inc. Quote
The company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 19.84%.
Let’s see how things are shaping up for the upcoming announcement.
Factors to Consider for Q4 Earnings
Beginning fourth-quarter 2021, Meta will report revenues and income (loss) from operations for the following two segments: Family of Apps (FoA) and Reality Labs (“RL”).
FoA includes Facebook, Instagram, Messenger, WhatsApp and other services. RL includes augmented and virtual-reality-related consumer hardware, software and content.
Usage of Meta’s services is expected to have remained strong despite increasing regulatory headwinds in the fourth quarter. This is likely to have driven top-line growth in the to-be-reported quarter.
The Zacks Consensus Estimate for fourth-quarter MAUs worldwide is pegged at 2.965 billion, suggesting 6% growth from the figure reported in the year-ago quarter. Moreover, DAUs worldwide is pegged at 1.953 billion, indicating 5.9% growth from the figure reported in the year-ago quarter.
An improved ad-spending environment, as well as accelerated digital shift, is expected to have driven Meta’s ad revenues in the to-be-reported quarter. The company’s top line is likely to have gained from improving market share, driven by a growing user base and continuing innovation in ad products.
According to an e-Marketer report, U.S. digital ad spending is estimated to be more than $200 billion in 2021. Meta, along with Google and Amazon, will make up 64% of this digital spending.
However, changes made by Apple and Google in their mobile operating systems and browser platforms have limited Meta’s ability to track user-activity trend.
Moreover, stiff competition from Google, Amazon and others for ad-dollars remains a headwind.
Snap is noteworthy given its rising popularity among Gen Zowing to the immersive experience offered by the platform.
Snap’s flagship platform, Snapchat, reaches 75% of the 13-34 year-old population of the United States, making it a bigger platform than Meta’s Facebook and Instagram among this demography.
These factors are expected to have affected Facebook’s year-over-year advertising revenue growth rate in fourth-quarter 2021.
The consensus mark for this Zacks Rank #3 (Hold) company’s third-quarter advertising revenues is pegged at $32.59 billion, indicating 20% growth from the figure reported in the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Markedly, advertising revenues surged 33.2% year over year to $28.28 billion and accounted for 97.5% of third-quarter revenues.
Non-ad revenues are expected to decline significantly in the fourth quarter of 2021. Other revenues had surged 194.8% year over year to $734 million in third-quarter 2021.
The Zacks Consensus Estimate for Other revenues is pegged at $850 million, indicating 4% decline from the figure reported in the year-ago quarter.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
As one investor put it, “curing and preventing hundreds of diseases…what should that market be worth?” This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.