We expect homebuilding company
Meritage Homes Corporation
) to beat expectations when it reports fourth quarter 2012
results on Jan 31.
Why a Likely Positive Surprise?
Our proven model shows that Meritage Homes is likely to beat
earnings because it has the right combination of two key
Positive Zacks ESP:
Expected Surprise Prediction or ESP (Read:
Zacks Earnings ESP: A Better Method
) is at +4.76%. This is very meaningful and a leading indicator
of a likely positive earnings surprise for shares.
Zacks Rank #1 (Strong Buy):
Note that stocks with a Zacks Rank #1, #2 and #3 have a
significantly higher chance of beating earnings. The sell rated
stocks (Zacks Rank #4 and #5) should never be considered going
into an earnings announcement.
The combination of Meritage Homes' Zacks Rank #1 (Strong Buy) and
+4.76% ESP makes us very confident in looking for a positive
earnings beat on Jan 31.
What is Driving the Better Than Expected Earnings?
The rising demand for new homes has led to a favorable situation
in the housing market, where inventory levels are dropping and
prices are moving up. 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.
The company delivered impressive surprises of 30.30% in third
quarter 2012 and 160.0% in second quarter 2012 driven by strong
growth in both net orders (volume) and average prices. The
company is also expected to benefit from its focus on well
positioned and high priced land, and new communities in the most
Other Stocks to Consider
Here are some other companies you may want to consider as our
model shows they have the right combination of elements to post
an earnings beat this quarter:
MDC Holdings Inc.
), Earnings ESP of +11.63% and Zacks Rank #1 (Strong Buy).
MDC HLDGS (MDC): Free Stock Analysis Report
MERITAGE HOMES (MTH): Free Stock Analysis
NVR INC (NVR): Free Stock Analysis Report
RYLAND GRP INC (RYL): Free Stock Analysis
To read this article on Zacks.com click here.
), Earnings ESP of +10.22% and Zacks Rank #1 (Strong Buy).
Ryland Group Inc.
), Earnings ESP of +6.00% and Zacks Rank #2 (Buy).