Meritage Homes Corporation
) recently announced the pricing of senior unsecured notes worth
$175 million due on 2018 to qualified institutional buyers. The
bonds were priced with a coupon of 4.50% and sold at par.
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Meritage intends to use a portion of the net proceeds to
repurchase its outstanding senior subordinate notes worth
$99,825,000 due 2017. The rest of the net proceeds will be used
for general corporate expenses.
Adjusting for the above transactions, Meritage will have about
$366 million of cash and cash equivalents compared with $295.5
million at the end of fiscal 2012 and about $798 million of total
The company has been witnessing a strong increase in revenues,
orders, prices and backlog for the past few quarters on the back
of improving housing market. In fact, the stabilizing recovery in
the housing market was also backed by lower home prices and
moderating interest rates as renting became a more expensive
option luring buyers to new homes.
Meritage reported impressive fourth-quarter 2012 results, beating
the Zacks Consensus Estimate for both revenues and earnings on
the back of a robust rise in home closings, revenues, improved
leverage of overhead expenses and reduced interest expenses. The
company has also been raising prices in most of its communities
with market demand gaining momentum.
In order to capitalize on the increased demand for new homes, the
company invested about $480 million in land and development in
fiscal 2012. The recent transaction will help the company improve
its inventory levels in order to meet the increased demand for
Meritage Homes currently carries a Zacks Rank #3 (Hold).
Other stocks in the homebuilding sector that are performing well
and deserve a mention include
) carrying a Zacks Rank #1 (Strong Buy) and
D. R. Horton Inc.
) carrying a Zacks Rank #2 (Buy).