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In the last reported quarter, the company’s earnings topped the Zacks Consensus Estimate by 42.9%. Homebuilding revenues beat the consensus mark by 14.5%. On a year-over-year basis, earnings and total revenues (including Homebuilding and Financial Services revenues) rose 42.9% and 14.5%, respectively. Total closing revenues increased 15% from the prior-year quarter’s level.
Meritage Homes’ earnings beat the consensus mark in 22 of the trailing 23 quarters.
Trend in Estimate Revision
The Zacks Consensus Estimate for second-quarter 2024 earnings per share (EPS) increased to $5.17 from $5.06 in the past 30 days. The said figure indicates a 3% increase from the year-ago level of $5.02 per share.
The consensus mark for revenues is pegged at $1.58 billion, indicating a 0.5% year-over-year increase.
Factors to Note
Meritage Homes’ second-quarter earnings and revenues are expected to have increased year over year on the back of solid demand for entry-level and first move-up homes, given the lack of existing homes for sale in the market. Improved cycle times and focus on land acquisition and development are likely to have aided the company's performance in the to-be-reported quarter.
The company expects home closing to be in the range of 3,600-3,800 units in the to-be-reported quarter, up from 3,490 units reported a year ago. Also, home closing revenues are anticipated to be in the $1.5-$1.6 billion range, up from $1.54 billion in the year-ago period considering the midpoint.
However, the challenging affordability conditions due to higher mortgage rates are likely to impact the company's performance in the quarter to some extent.
Segment-wise, for second-quarter 2024, our model predicts Homebuilding (contributed 99.6% to total revenues in 2023) to have dropped 1.4% year over year to $1.5 billion. However, we expect financial services revenues (contributed 0.4% to total revenues in 2023) to increase 12.7% year over year to $7 million.
We expect home closing units to increase 6.1% year over year to 3,701 units. We expect home closing revenues to drop 0.3% year over year to $1.54 billion due to lower average selling price (ASP). A product mix shift in the to-be-reported quarter is likely to have impacted ASP. We expect the home closing ASP to be $415,790, down 6% year over year.
Geographically, we expect home closing ASP in West, Central and East regions to decline 4.1%, 12.5% and 3% to $499,600, $365,220 and $393,330, respectively, year over year.
We also expect land closing revenues to plunge 71.6% year over year to $6.9 million.
Margins
For the second quarter, earnings of MTH are likely to have been dented by high costs associated with labor, which are likely to have negatively impacted its operations and hurt margins in the to-be-reported quarter.
However, increased focus on solid spec strategy and performance-driving initiatives will partly help the company to offset headwinds.
The company expects EPS to be within $4.70-$5.30. It expects the home closing gross margin to be around 24.5-25%, indicating an increase from the prior year’s value of 24.4%. We expect home closing gross margin to improve 50 basis points to 24.9%, year over year.
Backlogs and Home Orders
Owing to the aforementioned economic uncertainties, for second-quarter 2024, we expect the total backlog to decline 9.6% to 3,409 units and the total backlog value to fall 16.2% year over year to $1.4 billion.
Geographically, we expect home orders in the West and East regions to fall 20.8% to 1,081 units and 9.2% to 1,315 units, respectively, year over year. However, the Central region is likely to have benefited from economic growth in Texas, high demand for affordable homes, and strong backlog conversion rates. We expect home orders in the Central regions to increase 5.6% to 1,013 units.
What the Zacks Model Unveils
Our proven model predicts an earnings beat for MTH for the quarter to be reported. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.
Earnings ESP: MTH has an Earnings ESP of +0.64%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: It currently carries a Zacks Rank #3.
Other Stocks With the Favorable Combination
Here are some other companies in the Zacks Construction sector that, per our model, also have the right combination of elements to beat on earnings in the quarter to be reported.
EME’s earnings topped the consensus mark in all the last four quarters, with the average being 32%. Earnings for the to-be-reported quarter are expected to grow 24.8% year over year.
Dycom Industries (DY - Free Report) has an Earnings ESP of +3.90% and carries a Zacks Rank #2.
DY’s earnings beat the consensus mark in three of the last four quarters and missed on one occasion, the average surprise being 30.2%. Earnings for the to-be-reported quarter are expected to rise 7.4% year over year.
KBR, Inc. (KBR - Free Report) has an Earnings ESP of +0.82% and carries a Zacks Rank #3.
KBR’s earnings beat the consensus mark in the last four quarters, the average surprise being 5%. Earnings for the to-be-reported quarter are expected to grow 6.8% year over year.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Factors Setting the Tone for Meritage Homes' (MTH) Q2 Earnings
Meritage Homes Corporation (MTH - Free Report) is slated to report second-quarter 2024 results on Jul 24, after market close.
In the last reported quarter, the company’s earnings topped the Zacks Consensus Estimate by 42.9%. Homebuilding revenues beat the consensus mark by 14.5%. On a year-over-year basis, earnings and total revenues (including Homebuilding and Financial Services revenues) rose 42.9% and 14.5%, respectively. Total closing revenues increased 15% from the prior-year quarter’s level.
Meritage Homes’ earnings beat the consensus mark in 22 of the trailing 23 quarters.
Trend in Estimate Revision
The Zacks Consensus Estimate for second-quarter 2024 earnings per share (EPS) increased to $5.17 from $5.06 in the past 30 days. The said figure indicates a 3% increase from the year-ago level of $5.02 per share.
Meritage Homes Corporation Price and EPS Surprise
Meritage Homes Corporation price-eps-surprise | Meritage Homes Corporation Quote
The consensus mark for revenues is pegged at $1.58 billion, indicating a 0.5% year-over-year increase.
Factors to Note
Meritage Homes’ second-quarter earnings and revenues are expected to have increased year over year on the back of solid demand for entry-level and first move-up homes, given the lack of existing homes for sale in the market. Improved cycle times and focus on land acquisition and development are likely to have aided the company's performance in the to-be-reported quarter.
The company expects home closing to be in the range of 3,600-3,800 units in the to-be-reported quarter, up from 3,490 units reported a year ago. Also, home closing revenues are anticipated to be in the $1.5-$1.6 billion range, up from $1.54 billion in the year-ago period considering the midpoint.
However, the challenging affordability conditions due to higher mortgage rates are likely to impact the company's performance in the quarter to some extent.
Segment-wise, for second-quarter 2024, our model predicts Homebuilding (contributed 99.6% to total revenues in 2023) to have dropped 1.4% year over year to $1.5 billion. However, we expect financial services revenues (contributed 0.4% to total revenues in 2023) to increase 12.7% year over year to $7 million.
We expect home closing units to increase 6.1% year over year to 3,701 units. We expect home closing revenues to drop 0.3% year over year to $1.54 billion due to lower average selling price (ASP). A product mix shift in the to-be-reported quarter is likely to have impacted ASP. We expect the home closing ASP to be $415,790, down 6% year over year.
Geographically, we expect home closing ASP in West, Central and East regions to decline 4.1%, 12.5% and 3% to $499,600, $365,220 and $393,330, respectively, year over year.
We also expect land closing revenues to plunge 71.6% year over year to $6.9 million.
Margins
For the second quarter, earnings of MTH are likely to have been dented by high costs associated with labor, which are likely to have negatively impacted its operations and hurt margins in the to-be-reported quarter.
However, increased focus on solid spec strategy and performance-driving initiatives will partly help the company to offset headwinds.
The company expects EPS to be within $4.70-$5.30. It expects the home closing gross margin to be around 24.5-25%, indicating an increase from the prior year’s value of 24.4%. We expect home closing gross margin to improve 50 basis points to 24.9%, year over year.
Backlogs and Home Orders
Owing to the aforementioned economic uncertainties, for second-quarter 2024, we expect the total backlog to decline 9.6% to 3,409 units and the total backlog value to fall 16.2% year over year to $1.4 billion.
Geographically, we expect home orders in the West and East regions to fall 20.8% to 1,081 units and 9.2% to 1,315 units, respectively, year over year. However, the Central region is likely to have benefited from economic growth in Texas, high demand for affordable homes, and strong backlog conversion rates. We expect home orders in the Central regions to increase 5.6% to 1,013 units.
What the Zacks Model Unveils
Our proven model predicts an earnings beat for MTH for the quarter to be reported. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.
Earnings ESP: MTH has an Earnings ESP of +0.64%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: It currently carries a Zacks Rank #3.
Other Stocks With the Favorable Combination
Here are some other companies in the Zacks Construction sector that, per our model, also have the right combination of elements to beat on earnings in the quarter to be reported.
EMCOR Group, Inc. (EME - Free Report) has an Earnings ESP of +4.76% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
EME’s earnings topped the consensus mark in all the last four quarters, with the average being 32%. Earnings for the to-be-reported quarter are expected to grow 24.8% year over year.
Dycom Industries (DY - Free Report) has an Earnings ESP of +3.90% and carries a Zacks Rank #2.
DY’s earnings beat the consensus mark in three of the last four quarters and missed on one occasion, the average surprise being 30.2%. Earnings for the to-be-reported quarter are expected to rise 7.4% year over year.
KBR, Inc. (KBR - Free Report) has an Earnings ESP of +0.82% and carries a Zacks Rank #3.
KBR’s earnings beat the consensus mark in the last four quarters, the average surprise being 5%. Earnings for the to-be-reported quarter are expected to grow 6.8% year over year.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.