Meritage Homes Corporation MTH is slated to report fourth-quarter 2022 results on Feb 1, after market close.
In the last reported quarter, the company’s earnings topped the Zacks Consensus Estimate by 10.8%, but home closing revenues lagged the same by 3.4%. Earnings and total revenues (including Homebuilding and Financial Services revenues) improved by 35% and 25.2%, respectively, on a year-over-year basis. Total closing revenues also grew 25% from the prior-year quarter’s level.
The company surpassed earnings estimates in the trailing 15 quarters.
Trend in Estimate Revision
The Zacks Consensus Estimate for fourth-quarter 2022 earnings has remained stable at $7.03 over the past 60 days. Nonetheless, the said figure indicates a 12.5% increase from the year-ago earnings of $6.25 per share. The consensus mark for revenues is $1.95 billion, suggesting a 30.3% year-over-year improvement.
Meritage Homes Corporation Price and EPS Surprise
Meritage Homes Corporation price-eps-surprise | Meritage Homes Corporation Quote
Factors to Note
The U.S. housing market has been navigating through a challenging time comprised of rising mortgage rates, continued supply-chain issues, material cost inflation and higher wages. Higher mortgage rates and higher home prices have been prompting for moderation in housing demand.
Despite unprecedented supply-chain issues and increased inflation, Meritage Homes’ fourth-quarter revenues are expected to have increased from the year-ago level, buoyed by higher pricing and backlog level. Also, Meritage Homes has been focused on the growing demand for entry-level homes with its LiVE.NOW product, which addresses the need for lower-priced homes.
The Zacks Consensus Estimate for total closing revenues (Homebuilding) is $1,952 million, indicating growth from the year-ago figure of $1,499 million. For the fourth quarter, Meritage Homes expects 4,300- 4,700 home closings, which will likely generate quarterly home closing revenue of $1.85-$2.10 billion.
The Zacks Consensus Estimate for the company’s home closing revenues is pegged at $1,946 million, which indicates an increase from the year-ago figure of $1,499 million and from $1,569 million sequentially. The same for homes closed is pegged at 4,370 units, which indicates an increase from 3,526 a year ago and sequential growth from 3,487 homes.
To combat these aforementioned woes, the company has been raising average home prices. This, in turn, is likely to have helped maintain margins. The Zacks Consensus Estimate for the average selling price for homes closed is pegged at $444,000, which indicates an increase from $425,000 reported in the last year’s quarter.
The company projects Home closing gross margin to be 25% and earnings are likely to be within the $6.50-$7.40 range with an effective tax rate of 23.5%. The Zacks Consensus Estimate for the Home closing gross profit is pegged at $485 million, which indicates an increase from $435 million reported in the last year’s quarter.
However, slowing in housing demands due to affordability issues and prevailing industry headwinds, MTH is likely to have witnessed low orders and backlogs. The consensus mark for home orders is currently pegged at 2,183 units, which suggests a fall from 3,367 units reported in the year-ago period.
The Zacks Consensus Estimate for backlog at the end of fourth-quarter 2022 is currently pegged at 3,862 homes, indicating a decrease from 5,679 units reported in a year ago quarter and 6,064 units reported in the previous quarter. The potential value of the backlog is pegged at $1,770 million, indicating a decline from $2,516 million from fourth-quarter end.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for MTH for the quarter to be reported. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.
Earnings ESP: DHI has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: It currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks With Favorable Combinations
Here are some companies in the Zacks Construction sector that, according to our model, have the right combination of elements to post an earnings beat in their respective quarters to be reported.
Boise Cascade Company BCC has an Earnings ESP of +0.90% and a Zacks Rank #3.
Boise Cascade’s earnings topped the consensus mark in all the last four quarters, with the average being 30.9%. Earnings for the to-be-reported quarter are expected to grow 30.3% year over year.
Otis Worldwide Corporation OTIS has an Earnings ESP of +1.83% and a Zacks Rank #3.
OTIS’ earnings topped the consensus mark in all the last four quarters, with the average being 5.3%. Earnings for the to-be-reported quarter are expected to increase 1.4% year over year.
Fluor Corporation FLR has an Earnings ESP of +2.48% and a Zacks Rank #2.
FLR’s earnings topped the consensus mark in one the last four quarters and missed the same on other three occasions, with the average being -negative 38.2%. Earnings for the to-be-reported quarter are expected to grow 74.2% year over year.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Fluor Corporation (FLR) : Free Stock Analysis Report
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Otis Worldwide Corporation (OTIS) : Free Stock Analysis Report
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