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Meritage Homes' Q1 Earnings Lag Estimates, Revenues Decline Y/Y
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Meritage Homes Corporation (MTH - Free Report) reported first-quarter 2025 results, wherein earnings missed the Zacks Consensus Estimate, but total closing revenues topped the same. Revenues beat the consensus estimate for the tenth consecutive quarter.
Meritage Homes kicked off 2025 on solid footing, selling nearly 3,900 homes in the first quarter, even as the housing market faced headwinds. Executive chairman, Steven J. Hilton, attributed the strong performance to favorable housing demographics and a persistent shortage of affordable homes. He emphasized that steady demand in the new home market is being driven by these factors. With the strategic focus on affordability and a strong pipeline of move-in-ready homes, Meritage believes it is well-positioned to grow market share in the current environment.
MTH’s Earnings & Revenue Discussion
Earnings per share (EPS) of $1.69 missed the Zacks Consensus Estimate of $1.71. The reported figure decreased 33% from the year-ago quarter’s EPS of $2.53. The decline was largely caused by reduced home closing revenues, compressed gross margins and an increase in the effective tax rate.
Total revenues (including Total Closing revenues and Financial Services revenues) amounted to $1.36 billion, down 8% from $1.47 billion reported in the year-ago period.
Meritage Homes Corporation Price, Consensus and EPS Surprise
Total Closing Revenues: Total Closing revenues were $1.36 billion, which declined 8% from the prior-year quarter’s level but topped the consensus mark of $1.33 billion by 1.5%. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
Under the Homebuilding umbrella, home closing revenues of $1.34 billion declined 8% from the prior-year quarter’s level due to lower ASPs. Land closing revenues, however, grew 569% to $15.4 million from a year ago.
Meritage Homes reported 3,416 units of homes closed, down 3% from the year-ago quarter. The ASP of homes closing declined 2% from a year ago to $402,000 due to product and geographic mix. Our model’s estimate for the metric was 3,357 units for an ASP of $397,450.
Total home orders declined 3% from the prior year to 3,876 homes. In dollars, home orders decreased 4% year over year to $1.56 billion. We estimated home orders to be up 1.6% year over year. The average absorption pace was 4.4 per month in the quarter.
The quarter-end backlog totaled 2,004 units, down 34% year over year. The value of the backlog also decreased 35% year over year to $812.4 million.
Home closing gross margin contracted 380 basis points (bps) to 22%. The margin contraction was mainly due to greater use of financing incentives, lower absorption of fixed costs stemming from reduced home closing revenues and rising lot costs. These pressures were partially offset by improvements in direct cost efficiencies.
Selling, general and administrative expenses, as a percentage of home closing revenues, grew 90 bps from the prior-year quarter to 11.3%. This rise was mainly caused by lower fixed cost leverage due to reduced home closing revenues, along with higher spending on technology and startup costs for the new Gulf Coast and Huntsville divisions, which were preparing for a full quarter of home closings.
Financial Services: The segment’s revenues rose 11% from the prior-year quarter’s level to $7.08 million.
Meritage Homes’ Financial Position
At the end of March 31, 2025, cash and cash equivalents totaled $1.01 billion, up from $651.6 million reported on Dec. 31, 2024. As of March 31, 2025, approximately 84,200 lots were owned or controlled by the company compared with about 66,400 lots a year ago.
Total debt to capital was 26.1% compared with 20.6% in 2024-end. Net debt to capital was 13.7% compared with 11.7% on Dec. 31, 2024.
For first-quarter 2025, net cash used by operating activities was $42.6 million against $81.9 million of net cash provided by operating activities a year ago.
During first-quarter 2025, Meritage Homes paid quarterly cash dividends, totaling $31 million, to its shareholders. It brought back 605,316 shares for $45 million. As of March 31, 2025, $264 million remained under the authorized share repurchase program.
MTH’s 2025 Guidance
The company continues to expect to close between 16,250 and 16,750 homes, which would represent a modest increase from the 15,611 closed in 2024.
Revenues are projected to be between $6.6 billion and $6.9 billion, indicating continued demand for affordable housing. However, maintaining margins will be critical as financing incentives remain a key tool for driving sales.
D.R. Horton, Inc. (DHI - Free Report) reported dismal second-quarter fiscal 2025 (ended March 31, 2025) results, with earnings and total revenues missing the Zacks Consensus Estimate and decreasing on a year-over-year basis.
D.R. Horton now expects consolidated revenues to be in the range of $33.3-$34.8 billion, down from the previously expected range of $36-$37.5 billion. This compares with $36.8 billion in fiscal 2024. Homes closed are anticipated to be within 85,000-87,000 homes, down from the previously expected range of 90,000-92,000 units. This compares with 89,690 homes closed in fiscal 2024.
KB Home (KBH - Free Report) reported lackluster fiscal first-quarter 2025 results. The quarter’s earnings and total revenues missed the Zacks Consensus Estimate and tumbled year over year.
KB Home’s results reflect the softness in the housing market as homebuyers are still navigating through affordability concerns due to high mortgage rates. Besides, the ongoing macroeconomic uncertainties and other regulatory changes in the country are adding to the instability of the housing market. Owing to these market uncertainties and a lower net order level at the end of the quarter, KB Home lowered its fiscal 2025 guidance.
Lennar Corporation (LEN - Free Report) reported first-quarter fiscal 2025 results, wherein its earnings and revenues surpassed the Zacks Consensus Estimate. On a year-over-year basis, the top line increased but the bottom line declined.
Lennar’s performance was impacted by a challenging macroeconomic environment. Although demand remained strong, higher interest rates, inflation and weak consumer confidence made homeownership less accessible. A limited supply of affordable homes added to the difficulties, leading to a decline in the company's average sales price. Moving forward to fiscal 2025, to counter the market uncertainties, Lennar aims to focus on its volume-based strategy to drive sales and implement an asset-light, land-light business model.
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Meritage Homes' Q1 Earnings Lag Estimates, Revenues Decline Y/Y
Meritage Homes Corporation (MTH - Free Report) reported first-quarter 2025 results, wherein earnings missed the Zacks Consensus Estimate, but total closing revenues topped the same. Revenues beat the consensus estimate for the tenth consecutive quarter.
Meritage Homes kicked off 2025 on solid footing, selling nearly 3,900 homes in the first quarter, even as the housing market faced headwinds. Executive chairman, Steven J. Hilton, attributed the strong performance to favorable housing demographics and a persistent shortage of affordable homes. He emphasized that steady demand in the new home market is being driven by these factors. With the strategic focus on affordability and a strong pipeline of move-in-ready homes, Meritage believes it is well-positioned to grow market share in the current environment.
MTH’s Earnings & Revenue Discussion
Earnings per share (EPS) of $1.69 missed the Zacks Consensus Estimate of $1.71. The reported figure decreased 33% from the year-ago quarter’s EPS of $2.53. The decline was largely caused by reduced home closing revenues, compressed gross margins and an increase in the effective tax rate.
Total revenues (including Total Closing revenues and Financial Services revenues) amounted to $1.36 billion, down 8% from $1.47 billion reported in the year-ago period.
Meritage Homes Corporation Price, Consensus and EPS Surprise
Meritage Homes Corporation price-consensus-eps-surprise-chart | Meritage Homes Corporation Quote
Segment Details of MTH’s Quarterly Release
Total Closing Revenues: Total Closing revenues were $1.36 billion, which declined 8% from the prior-year quarter’s level but topped the consensus mark of $1.33 billion by 1.5%. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
Under the Homebuilding umbrella, home closing revenues of $1.34 billion declined 8% from the prior-year quarter’s level due to lower ASPs. Land closing revenues, however, grew 569% to $15.4 million from a year ago.
Meritage Homes reported 3,416 units of homes closed, down 3% from the year-ago quarter. The ASP of homes closing declined 2% from a year ago to $402,000 due to product and geographic mix. Our model’s estimate for the metric was 3,357 units for an ASP of $397,450.
Total home orders declined 3% from the prior year to 3,876 homes. In dollars, home orders decreased 4% year over year to $1.56 billion. We estimated home orders to be up 1.6% year over year. The average absorption pace was 4.4 per month in the quarter.
The quarter-end backlog totaled 2,004 units, down 34% year over year. The value of the backlog also decreased 35% year over year to $812.4 million.
Home closing gross margin contracted 380 basis points (bps) to 22%. The margin contraction was mainly due to greater use of financing incentives, lower absorption of fixed costs stemming from reduced home closing revenues and rising lot costs. These pressures were partially offset by improvements in direct cost efficiencies.
Selling, general and administrative expenses, as a percentage of home closing revenues, grew 90 bps from the prior-year quarter to 11.3%. This rise was mainly caused by lower fixed cost leverage due to reduced home closing revenues, along with higher spending on technology and startup costs for the new Gulf Coast and Huntsville divisions, which were preparing for a full quarter of home closings.
Financial Services: The segment’s revenues rose 11% from the prior-year quarter’s level to $7.08 million.
Meritage Homes’ Financial Position
At the end of March 31, 2025, cash and cash equivalents totaled $1.01 billion, up from $651.6 million reported on Dec. 31, 2024. As of March 31, 2025, approximately 84,200 lots were owned or controlled by the company compared with about 66,400 lots a year ago.
Total debt to capital was 26.1% compared with 20.6% in 2024-end. Net debt to capital was 13.7% compared with 11.7% on Dec. 31, 2024.
For first-quarter 2025, net cash used by operating activities was $42.6 million against $81.9 million of net cash provided by operating activities a year ago.
During first-quarter 2025, Meritage Homes paid quarterly cash dividends, totaling $31 million, to its shareholders. It brought back 605,316 shares for $45 million. As of March 31, 2025, $264 million remained under the authorized share repurchase program.
MTH’s 2025 Guidance
The company continues to expect to close between 16,250 and 16,750 homes, which would represent a modest increase from the 15,611 closed in 2024.
Revenues are projected to be between $6.6 billion and $6.9 billion, indicating continued demand for affordable housing. However, maintaining margins will be critical as financing incentives remain a key tool for driving sales.
MTH 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.
D.R. Horton, Inc. (DHI - Free Report) reported dismal second-quarter fiscal 2025 (ended March 31, 2025) results, with earnings and total revenues missing the Zacks Consensus Estimate and decreasing on a year-over-year basis.
D.R. Horton now expects consolidated revenues to be in the range of $33.3-$34.8 billion, down from the previously expected range of $36-$37.5 billion. This compares with $36.8 billion in fiscal 2024. Homes closed are anticipated to be within 85,000-87,000 homes, down from the previously expected range of 90,000-92,000 units. This compares with 89,690 homes closed in fiscal 2024.
KB Home (KBH - Free Report) reported lackluster fiscal first-quarter 2025 results. The quarter’s earnings and total revenues missed the Zacks Consensus Estimate and tumbled year over year.
KB Home’s results reflect the softness in the housing market as homebuyers are still navigating through affordability concerns due to high mortgage rates. Besides, the ongoing macroeconomic uncertainties and other regulatory changes in the country are adding to the instability of the housing market. Owing to these market uncertainties and a lower net order level at the end of the quarter, KB Home lowered its fiscal 2025 guidance.
Lennar Corporation (LEN - Free Report) reported first-quarter fiscal 2025 results, wherein its earnings and revenues surpassed the Zacks Consensus Estimate. On a year-over-year basis, the top line increased but the bottom line declined.
Lennar’s performance was impacted by a challenging macroeconomic environment. Although demand remained strong, higher interest rates, inflation and weak consumer confidence made homeownership less accessible. A limited supply of affordable homes added to the difficulties, leading to a decline in the company's average sales price. Moving forward to fiscal 2025, to counter the market uncertainties, Lennar aims to focus on its volume-based strategy to drive sales and implement an asset-light, land-light business model.