Meritage Homes Corporation
) fourth quarter 2012 adjusted (for impairments and
extinguishment of debt) earnings per share of 63 cents beat the
Zacks Consensus Estimate of 42 cents by 50.0% on the back of
robust rise in home closings, revenue, improved leverage of
overhead expenses and reduced interest expenses. The company's
results also improved significantly from earnings of 6 cents in
the prior-year quarter.
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The company reported adjusted earnings per share of $1.29 per
share in fiscal 2012 versus a loss of 15 cents in the prior year.
The adjusted earnings per share beat the Zacks Consensus Estimate
of 74 cents. The company reported 38.6% rise in total closing
revenue of $1.19 billion in fiscal 2012, driven by 30% increase
in number of homes closed and 38% rise in home closing revenue.
Total revenue in the fourth quarter of 2012 amounted to $364.6
million, up 48.2% year over year. Meritage's home closing
revenues were $364.1 million, up 48.2% from the prior-year
quarter. Reported revenues beat the Zacks Consensus Estimate of
$351 million. Year-over-year growth in home closing revenues was
attributable to a 39% increase in the number of homes closed and
a 7% hike in average closing prices, owing to a shift in mix
toward higher priced homes and communities.
Net sales orders climbed 46% year over year to 1,094 units during
the quarter, reflecting sales order gains across all states. The
value of net orders rose 72% to $353.9 million owing to order
growth and an 18% hike in average prices. The boom in net order
bookings was attributed to a stabilizing recovery in the housing
market. This was backed by lower home prices and moderating
interest rates as renting became a more expensive option luring
buyers to new homes.
The company closed 1,240 homes in the fourth quarter of 2012.
Sales growth was highest in California, Texas and Florida. The
company has started raising prices in most of its communities
with market demand gaining momentum. The average selling prices
of the closings stood at $294 million, up 7%.
Meritage's backlog totaled 1,472 homes as of Dec 31, 2012, up 61%
from 915 homes as of Dec 31, 2011. The value of backlog grew 93%
year over year to $479.3 million in the fourth quarter of 2012,
owing to stronger demand and higher prices. Cancellation rate in
the quarter also improved 600 basis points to 13% of gross orders
versus 19% in the prior-year quarter, driven by expectation of
further price appreciations.
Adjusted home closing gross profit increased to $69.2 million, up
50.1% year over year. The increase in gross profit was driven by
higher sales prices. Consequently, the company's home closing
gross margin was 19.0% in fourth quarter of 2012, up 20 basis
points from the prior-year quarter.
We have a favorable view of the fact that Meritage Homes has been
witnessing significant growth in new home orders, backlogs and
homes delivered for the past two quarters, gaining from the
improvement in housing fundamentals.
Meritage Homes currently carries a Zacks Rank #1 (Strong Buy).
Other stocks in the homebuilding sector that are performing well
and deserve a mention include
MDC Holdings Inc.
Ryland Group Inc.
), each carrying a Zacks Rank #1 (Strong Buy).