Meritage Homes (MTH) Beats Q3 Earnings & Revenue Estimates
Meritage Homes Corporation MTH reported third-quarter 2019 results, with earnings and revenues surpassing the Zacks Consensus Estimate on strong homebuying activity.
Earnings of $1.79 per share topped the consensus mark of $1.49 by 19.9%. Also, the reported figure improved 35% year over year backed by home closing revenues, gross margins and greater overhead leverage.
Home closing revenues amounted to $939.2 million that surpassed the consensus mark of $914 million by 2.3% and rose 7% year over year. Meanwhile, total revenues (including Home closing, Land closing and Financial services revenues) totaled $945.2 million, up 6.4% from year-ago quarter’s levels.
Meritage Corporation Price, Consensus and EPS Surprise
Homebuilding/Total Closing Revenues: Revenues in the segment increased 6% from the prior-year quarter’s tally to $940.9 million. The upside can be attributed to a 12% increase in volume, partially offsets by 4% reduction in average sales price (ASP) due to shift in product mix.
Home closing revenues in the East and Central regions were up by 15% and 9% year over year, respectively, while West remained flat.
Homes closed during the quarter came in at 2,419, up 12% year over year. Home closing gross margin for the third quarter increased 170 basis points (bps) to 19.8% from year-ago quarter’s figure, contributing 17% year-over-year increase to total home closing gross profit.
Total orders increased 24% from the prior-year quarter’s levels to 2,258 homes. The value of net orders also increased 20% year over year to $858.4 million mainly due to higher absorption rate.
However, land closing revenues amounted to $1.7 million that declined from $6.8 million in the year-ago quarter.
Financial Services: The segment’s revenues increased 13% from the prior-year quarter’s level to $4.3 million.
Selling, general and administrative expenses (as a percentage of home closing revenues) of 10.7% fell 30 bps from the prior-year quarter’s level of 11%.
As of Sept 30, 2019, cash and cash equivalents totaled $454.8 million compared with $311.5 million on Dec 31, 2018.
As of Sept 30, debt-to-capital ratio of the company fell to 41.1% from 43.2% on Dec 31, 2018. Also, net debt-to-capital ratio contracted to 31.3% from 36.7% on Dec 31, 2018.
Raised 2019 Guidance
Meritage Homes now expects 2019 home closings in the range of 8,900-9,100 compared with 8,700-9,100 projected earlier. The company expects total home closing revenues of approximately 3.5 billion, maintaining the mid-point of its previously guided range of $3.4-$3.6 billion.
The company anticipates home closing gross margin in mid to high 18% and earnings in the range of $5.50-$5.70 per share compared with $5.20-5.50 expected earlier.
Zacks Rank & Peer Releases
Meritage Homes currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
KB Home KBH reported third-quarter fiscal 2019 results, with earnings beating analysts’ expectation and revenues missing the same. The quarterly results primarily benefited from continued progress of the Returns-Focused Growth plan. Although the company’s top and the bottom line declined on a year-over-year basis, it is optimistic about improvement in fiscal fourth-quarter results.
Lennar Corporation LEN reported better-than-expected third-quarter fiscal 2019 (ended Aug 31, 2019) results. The quarterly numbers mainly benefited from a solid resurgence in demand for new homes, which depicts healthy economy and declining borrowing costs.
PulteGroup, Inc PHM reported third-quarter 2019 results, with earnings and revenues beating respective Zacks Consensus Estimate. Higher demand owing to favorable housing dynamics backed by lower interest rates and improved affordability had a positive impact on PulteGroup’s performance in the quarter.
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