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Meritage Upgraded to Strong Buy - Analyst Blog

Posted: 7/11/2013 12:40:00 PM
Referenced Stocks: DHI;MTH;RYL;TMHC

On Jul 10, Zacks Investment Research upgraded Meritage Homes Corporation ( MTH ), one of the largest home building companies in the United States, to a Zacks Rank #1 (Strong Buy), ahead of its second quarter results on Jul 24.

Why the Upgrade?

Meritage is expected to report solid top-line growth in the upcoming quarter. The company expects to benefit from the steady and broad-based housing market recovery, which continues to boost both demand and prices despite recent concerns over rising interest rates. In fact, Meritage has been witnessing double-digit surprise for the past four quarters with an impressive average beat of 68.08%.

Meritage beat the Zacks Consensus Estimate on both counts in the first quarter of 2013.  The company witnessed double-digit year-over-year growth in home closing revenues, prices and net orders in the quarter.

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 stunning 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.  

Other Stocks to Consider   

Other stocks in the homebuilding sector that are performing well and deserve a mention include D. R. Horton Inc. ( DHI ), Ryland Group Inc. ( RYL ) and Taylor Morrison Home Corporation ( TMHC ), all carrying a Zacks Rank #1 (Strong Buy).  

D R HORTON INC (DHI): Free Stock Analysis Report

MERITAGE HOMES (MTH): Free Stock Analysis Report

RYLAND GRP INC (RYL): Free Stock Analysis Report

TAYLOR MORRISON (TMHC): Free Stock Analysis Report

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Zacks Investment Research