On January 12, Zacks Investment Research upgraded homebuilding
Meritage Homes Corporation
) to a Zacks Rank #1 (Strong Buy), driven by consistent strong
performance for the past two quarters.
Why the Upgrade?
Meritage Homes Corporation has been witnessing increasing
earnings estimates, driven by solid third 2012 performance. The
company delivered impressive surprises of 30.30% in third quarter
2012 and 160.0% in second quarter 2012.
Moreover, estimates are continuously rising, reflecting
expectations for significantly higher year-over-year earnings
growth rates in fiscal 2013 and 2014. The long-term expected
earnings growth rate for this stock is 7.67%.
Meritage Homes reported fiscal third-quarter (ended September
30) results on October 25. The company's third quarter 2012
adjusted earnings of 43 cents beat the Zacks Consensus Estimate
of 33 cents by 30.3% on the back of robust new order growth. The
results also improved significantly from a loss of 10 cents in
the prior-year quarter.
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Total revenue in the third quarter of 2012 amounted to $342.6
million, up 57.5% year-over-year. Reported revenue beat the Zacks
Consensus Estimate of $342 million. Year-over-year growth in home
closing revenue was attributable to a 43% increase in the number
of homes closed and an 8% hike in average closing prices, owing
to a shift in mix toward higher priced homes and communities.
The strong performance in third quarter 2012 was attributed to a
stabilizing recovery in the housing market. This was backed by
moderating interest rates as renting became a more expensive
option luring buyers to new homes.
The Zacks Consensus Estimate for fiscal 2013 increased 5.7% to
$2.05 per share as most of the estimates were revised higher over
the last 90 days.
Other Stocks to Consider
Other companies with a favorable Zacks Rank and worth considering
MDC Holdings Inc.
), both carrying a Zacks Rank #1 (Strong Buy), and
Hovnanian Enterprises Inc.
) both carrying a Zacks Rank #2 (Buy).