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Meritage Homes (MTH) Q2 Earnings & Revenues Top, '24 View Up
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Meritage Homes Corporation (MTH - Free Report) reported impressive second-quarter 2024 results, wherein the earnings and total closing revenues topped the Zacks Consensus Estimate and grew year over year.
The quarterly results were backed by resilient housing demand and the company’s progress in delivering quick-turning and affordable move-in-ready homes. The current backdrop of underbuilt supply of homes in the market has been acting as a catalyst in fueling the demand for newly built homes, thus increasing order volumes. Furthermore, the company’s efficient capital management initiatives have added to the uptrend, since it invested $631 million in land acquisition and development and brought in more than 8,700 net new lots under control during the quarter.
Despite the ongoing mortgage interest rate volatility in the market, MTH was able to achieve record second-quarter home closings thanks to the aforementioned tailwinds. Also, the positive factors aided it in achieving a backlog conversion rate of 136% and a return on equity of 18.3% during the quarter. Owing to the improving trend, the company raised its home closing revenues and earnings per share outlook for 2024.
Shares of this homebuilding company gained 1.3% in the after-hours trading session on Jul 24 after the announcement of the results.
Earnings & Revenue Discussion
Earnings per share (EPS) of $6.31 topped the Zacks Consensus Estimate by 22.1%. The reported figure increased 26% from the year-ago quarter’s reported EPS of $5.02.
Meritage Homes Corporation Price, Consensus and EPS Surprise
Total revenues (including Homebuilding and Financial Services revenues) amounted to $1.7 billion, up 8.3% from $1.57 billion reported in the year-ago period.
Segment Discussion
Homebuilding: Total closing revenues were $1.69 billion, which grew 7.6% from the prior-year quarter’s level of $1.57 billion and surpassed the consensus mark of $1.57 billion by 7.5%.
Under the Homebuilding umbrella, home closing revenues of $1.69 billion grew 10% from the prior-year quarter’s level of $1.54 billion.
Meritage Homes reported 4,118 units of homes closed, up 18% from 3,490 units in the year-ago quarter. The average sales price (“ASP”) of homes closing declined 7% from a year ago to $411,000 due to product and geographic mix. Our model’s estimate for the metric was 3,701 units for an ASP of $415,790.
Total home orders rose 14% from the prior year to 3,799 homes. In dollars, home orders increased 7% year over year to $1.57 billion. A 6% lower ASP of $414,000 due to both geographic and product mix shifts impacted growth to some extent. We estimated home orders to be up 22.1% year over year. The average absorption pace was 4.5 per month, up 15% from 3.9 in the prior year. The average community count declined 1.4% year over year but grew 4% sequentially to 287.
Entry-level buyers represented 92% of sales orders compared with 85% in the year-ago period.
The quarter-end backlog totaled 2,714 units, down 28% year over year. The value of the backlog also decreased 34% year over year to $1.11 billion.
Adjusted home closing gross margin expanded 150 basis points (bps) to 24.4%, driven by lower direct costs, greater leverage of fixed costs and shorter construction cycle times, partially offset by higher lot costs. Selling, general and administrative expenses — as a percentage of home closing revenues — contracted 30 bps from the prior-year quarter to 9.3% primarily because of leverage achieved on higher home closing revenues.
Financial Services: The segment’s revenues rose 33.8% from the prior-year quarter’s level to $8.31 million.
Balance Sheet
At the end of the second quarter, cash and cash equivalents totaled $992.9 million, up from $921.2 million reported at the end of Dec 31, 2023. At the end of Jun 30, 2024, approximately 71,000 lots were owned or controlled by the company compared with about 60,000 lots a year ago.
Total debt to capital was 21.2% compared with 17.9% in 2023-end. Net debt to capital was 6.2% compared with 1.9% at Dec 31, 2023.
At the end of the six months ended Jun 30, 2024, net cash used by operating activities was $36 million against $355.9 million of net cash provided by operating activities a year ago.
During the quarter, Meritage Homes paid quarterly cash dividends of $0.75 per share totaling $27.2 million to its shareholders. There were no share repurchases during the quarter due to the customary lock-out restrictions associated with the 2028 Convertible Notes issuance. As of Jun 30, 2024, $129.1 million in shares remained under the authorized share repurchase program.
Raised 2024 Outlook
Meritage Homes now expects 14,750-15,500 home closings for the year, up from the prior expected range of 14,500-15,000 home closings. The closings are now likely to generate revenues between $6.1 billion and $6.3 billion, which are up from the priorly expected range of $6-$6.2 billion.
Home closing gross margin is still expected to be in the 24.5-25% range compared with 24.9% in 2023.
The EPS for the year is now expected to be between $19.80 and $21.00, up from the previously expected range of $19.20-$20.70.
The company still expects an effective tax rate of approximately 22.5%.
NVR, Inc. (NVR - Free Report) reported mixed second-quarter 2024 results, with earnings missing the Zacks Consensus Estimate while Homebuilding revenues surpassed the same. On the other hand, both metrics increased on a year-over-year basis.
The upside was backed by improved demand trends, which resulted in higher settlements. Although the cancellation rate increased during the quarter, growth in new orders and increased ASP of new orders are encouraging for the company’s prospects. Settlements in the quarter were up 11% year over year to 5,659 units. New orders increased 3% from the prior-year quarter’s level to 6,067 units. On a unit basis, backlog at the end of Jun 30, 2024, improved 3% from the prior-year quarter’s figure to 11,597 homes and 6% on a dollar basis to $5.45 billion.
PulteGroup Inc. (PHM - Free Report) reported stellar results in the second quarter of 2024, wherein earnings and revenues handily beat the Zacks Consensus Estimate. On a year-over-year basis, both the bottom and top lines increased.
PHM saw significant benefits from key factors, which drove its success. The company's balanced operating model resulted in increases in closings, average sales price and gross margin, which collectively led to a 19.3% increase in EPS. Effective management of sales price, pace and starts on a community-by-community basis enabled the company to achieve high returns on invested capital and equity, evidenced by a 27.1% return on equity over the past 12 months.
D.R. Horton, Inc. (DHI - Free Report) reported third-quarter fiscal 2024 (ended Jun 30, 2024) results, with earnings and revenues surpassing Zacks Consensus Estimate. On a year-over-year basis, both the bottom and top lines increased.
DHI now expects consolidated revenues in the range of $36.8-$37.2 billion compared with the prior expected range of $36.7-$37.7 billion. The company reported $35.5 billion in revenues in fiscal 2023. Homes closed are anticipated within 90,000-90,500 units compared with 89,000-91,000 units expected earlier.
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Meritage Homes (MTH) Q2 Earnings & Revenues Top, '24 View Up
Meritage Homes Corporation (MTH - Free Report) reported impressive second-quarter 2024 results, wherein the earnings and total closing revenues topped the Zacks Consensus Estimate and grew year over year.
The quarterly results were backed by resilient housing demand and the company’s progress in delivering quick-turning and affordable move-in-ready homes. The current backdrop of underbuilt supply of homes in the market has been acting as a catalyst in fueling the demand for newly built homes, thus increasing order volumes. Furthermore, the company’s efficient capital management initiatives have added to the uptrend, since it invested $631 million in land acquisition and development and brought in more than 8,700 net new lots under control during the quarter.
Despite the ongoing mortgage interest rate volatility in the market, MTH was able to achieve record second-quarter home closings thanks to the aforementioned tailwinds. Also, the positive factors aided it in achieving a backlog conversion rate of 136% and a return on equity of 18.3% during the quarter. Owing to the improving trend, the company raised its home closing revenues and earnings per share outlook for 2024.
Shares of this homebuilding company gained 1.3% in the after-hours trading session on Jul 24 after the announcement of the results.
Earnings & Revenue Discussion
Earnings per share (EPS) of $6.31 topped the Zacks Consensus Estimate by 22.1%. The reported figure increased 26% from the year-ago quarter’s reported EPS of $5.02.
Meritage Homes Corporation Price, Consensus and EPS Surprise
Meritage Homes Corporation price-consensus-eps-surprise-chart | Meritage Homes Corporation Quote
Total revenues (including Homebuilding and Financial Services revenues) amounted to $1.7 billion, up 8.3% from $1.57 billion reported in the year-ago period.
Segment Discussion
Homebuilding: Total closing revenues were $1.69 billion, which grew 7.6% from the prior-year quarter’s level of $1.57 billion and surpassed the consensus mark of $1.57 billion by 7.5%.
Under the Homebuilding umbrella, home closing revenues of $1.69 billion grew 10% from the prior-year quarter’s level of $1.54 billion.
Meritage Homes reported 4,118 units of homes closed, up 18% from 3,490 units in the year-ago quarter. The average sales price (“ASP”) of homes closing declined 7% from a year ago to $411,000 due to product and geographic mix. Our model’s estimate for the metric was 3,701 units for an ASP of $415,790.
Total home orders rose 14% from the prior year to 3,799 homes. In dollars, home orders increased 7% year over year to $1.57 billion. A 6% lower ASP of $414,000 due to both geographic and product mix shifts impacted growth to some extent. We estimated home orders to be up 22.1% year over year. The average absorption pace was 4.5 per month, up 15% from 3.9 in the prior year. The average community count declined 1.4% year over year but grew 4% sequentially to 287.
Entry-level buyers represented 92% of sales orders compared with 85% in the year-ago period.
The quarter-end backlog totaled 2,714 units, down 28% year over year. The value of the backlog also decreased 34% year over year to $1.11 billion.
Adjusted home closing gross margin expanded 150 basis points (bps) to 24.4%, driven by lower direct costs, greater leverage of fixed costs and shorter construction cycle times, partially offset by higher lot costs. Selling, general and administrative expenses — as a percentage of home closing revenues — contracted 30 bps from the prior-year quarter to 9.3% primarily because of leverage achieved on higher home closing revenues.
Financial Services: The segment’s revenues rose 33.8% from the prior-year quarter’s level to $8.31 million.
Balance Sheet
At the end of the second quarter, cash and cash equivalents totaled $992.9 million, up from $921.2 million reported at the end of Dec 31, 2023. At the end of Jun 30, 2024, approximately 71,000 lots were owned or controlled by the company compared with about 60,000 lots a year ago.
Total debt to capital was 21.2% compared with 17.9% in 2023-end. Net debt to capital was 6.2% compared with 1.9% at Dec 31, 2023.
At the end of the six months ended Jun 30, 2024, net cash used by operating activities was $36 million against $355.9 million of net cash provided by operating activities a year ago.
During the quarter, Meritage Homes paid quarterly cash dividends of $0.75 per share totaling $27.2 million to its shareholders. There were no share repurchases during the quarter due to the customary lock-out restrictions associated with the 2028 Convertible Notes issuance. As of Jun 30, 2024, $129.1 million in shares remained under the authorized share repurchase program.
Raised 2024 Outlook
Meritage Homes now expects 14,750-15,500 home closings for the year, up from the prior expected range of 14,500-15,000 home closings. The closings are now likely to generate revenues between $6.1 billion and $6.3 billion, which are up from the priorly expected range of $6-$6.2 billion.
Home closing gross margin is still expected to be in the 24.5-25% range compared with 24.9% in 2023.
The EPS for the year is now expected to be between $19.80 and $21.00, up from the previously expected range of $19.20-$20.70.
The company still expects an effective tax rate of approximately 22.5%.
Zacks Rank & Peer Releases
Meritage Homes currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NVR, Inc. (NVR - Free Report) reported mixed second-quarter 2024 results, with earnings missing the Zacks Consensus Estimate while Homebuilding revenues surpassed the same. On the other hand, both metrics increased on a year-over-year basis.
The upside was backed by improved demand trends, which resulted in higher settlements. Although the cancellation rate increased during the quarter, growth in new orders and increased ASP of new orders are encouraging for the company’s prospects. Settlements in the quarter were up 11% year over year to 5,659 units. New orders increased 3% from the prior-year quarter’s level to 6,067 units. On a unit basis, backlog at the end of Jun 30, 2024, improved 3% from the prior-year quarter’s figure to 11,597 homes and 6% on a dollar basis to $5.45 billion.
PulteGroup Inc. (PHM - Free Report) reported stellar results in the second quarter of 2024, wherein earnings and revenues handily beat the Zacks Consensus Estimate. On a year-over-year basis, both the bottom and top lines increased.
PHM saw significant benefits from key factors, which drove its success. The company's balanced operating model resulted in increases in closings, average sales price and gross margin, which collectively led to a 19.3% increase in EPS. Effective management of sales price, pace and starts on a community-by-community basis enabled the company to achieve high returns on invested capital and equity, evidenced by a 27.1% return on equity over the past 12 months.
D.R. Horton, Inc. (DHI - Free Report) reported third-quarter fiscal 2024 (ended Jun 30, 2024) results, with earnings and revenues surpassing Zacks Consensus Estimate. On a year-over-year basis, both the bottom and top lines increased.
DHI now expects consolidated revenues in the range of $36.8-$37.2 billion compared with the prior expected range of $36.7-$37.7 billion. The company reported $35.5 billion in revenues in fiscal 2023. Homes closed are anticipated within 90,000-90,500 units compared with 89,000-91,000 units expected earlier.