Meritage Homes Corporation
) first-quarter 2013 earnings per share of 32 cents beat the
Zacks Consensus Estimate of 25 cents by 28.0%.
Earnings per share also improved significantly from a loss of 15
cents a share recorded in the prior-year quarter buoyed by robust
rise in home closing revenues.
Total revenue in the first quarter of 2013 amounted to $336.4
million, up 64.6% year over year. Reported revenues beat the
Zacks Consensus Estimate of $316 million by 6.5%. Meritage's home
closing revenues were $330.7 million, up 62.1% from the
prior-year quarter. Year-over-year growth in home closing
revenues was attributable to a 39% increase in the number of
homes closed and a 17% hike in average closing prices.
Net sales orders climbed 35% year over year to 1,547 units during
the quarter, reflecting sales order gains across all states. The
value of net orders rose 69% to $520.4 million owing to order
growth and a 25% hike in average prices. The boom in net order
bookings was attributed to a stabilizing recovery in the housing
market. This was backed by low interest rates and high
affordability as renting became a more expensive option luring
buyers to new homes. Markets in California, Colorado, the
Carolinas and Florida witnessed strongest order growth during the
The company closed 1,052 homes in the first quarter of 2013, up
39%. The company started raising prices in most of its
communities with market demand gaining momentum. The average
selling prices of the closings stood at $314 million, up 17%.
Meritage's backlog totaled 1,967 homes as of Mar 31, 2013, up 51%
from 1,300 homes as of Mar 31, 2012. The value of backlog grew
89% year over year to $669 million in the first quarter of 2013,
owing to stronger demand and 25% increase in prices. Cancellation
rate in the quarter also improved 400 basis points to 11% of
gross orders versus 15% in the prior-year quarter, driven by
expectation of further price appreciations.
Reported home closing gross profit increased to $64.4 million, up
83.5% year over year. The increase in gross profit was driven by
higher sales prices. Consequently, the company's adjusted home
closing gross margin was 21.0% in the first quarter of 2013, up
260 basis points from the prior-year quarter.
The company opened 24 new communities during the first quarter of
2013, ending the quarter with 168 active communities. Community
count was up 12% from the prior-year quarter and highest in about
last four years. With the demand for new homes gaining momentum,
prices have gone up due to inadequate supply. As such Meritage
spend $75 million on land acquisition and added about 1,600 lots
under contract during the quarter.
Meritage believes that with the improvement in overall economy,
job market and low mortgage rates, housing demand will continue
to increase. The company expects 40% to 45% year-over-year
increase in revenues for each of the remaining three quarters of
2013. Earnings per share are expected in the range of $2.20 to
$2.45 for 2013, which marks a 350% - 400% increase in pre-tax
earnings. The company expects to end 2013 with 185 active
communities. The company further intends to invest up to $600
million in land development in 2013.
We appreciate Meritage's consistent earnings beat for the past
four quarters. The company has been witnessing strong top-line
growth and margin expansion, which promises steady growth
momentum in the upcoming quarters.
Meritage Homes Corporation currently carries a Zacks Rank #3
Other stocks in the homebuilding sector that are performing
well and deserve a mention include
D. R. Horton Inc.
Ryland Group Inc.
). While D.R Horton and Ryland carry a Zacks Rank #1 (Strong
Buy), KB Home carries a Zacks Rank #2 (Buy).
D R HORTON INC (DHI): Free Stock Analysis
KB HOME (KBH): Free Stock Analysis Report
MERITAGE HOMES (MTH): Free Stock Analysis
RYLAND GRP INC (RYL): Free Stock Analysis
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