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Meritage Homes (MTH) Q1 Earnings Beat, Orders & Backlog Up
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Meritage Homes Corporation’s (MTH - Free Report) stock gained 12.7% in the after-hours trading session on Apr 24 after it reported impressive results for first-quarter 2024.
Both earnings and total closing revenues surpassed the Zacks Consensus Estimate and increased on a year-over-year basis. The upside was backed by higher deliveries.
Solid execution on its spec building and streamlined strategy helped it achieve yet another record backlog conversion rate of 138% and a return on equity of 18% during the quarter.
Earnings & Revenue Discussion
Earnings per share (EPS) of $5.06 beat the Zacks Consensus Estimate and the year-ago figure of $3.54 by 42.9%.
Meritage Homes Corporation Price, Consensus and EPS Surprise
Total revenues (including Homebuilding and Financial Services revenues) amounted to $1.472 billion, up 14.5% from $1.285 billion reported in the year-ago period.
Segment Discussion
Homebuilding: Total closing revenues were $1.468 billion, which grew 15% from the prior-year quarter’s level of $1.26 billion and beat the consensus mark of $1.28 billion by 14.5%.
Under the Homebuilding umbrella, home closing revenues totaled $1.466 billion, increasing 16% from the prior-year quarter’s level of $1.26 billion. Land closing revenues amounted to $2.31 million, which declined 87% from $17.4 million reported in the year-ago quarter.
MTH reported 3,507 units of homes closed, down 21% from 2,897 units year over year. The average sales price (ASP) was 4% lower from a year ago to $418,000 due to a product mix shift. ASP increased sequentially owing to reduced utilization of rate lock financing incentives and price increases. Our estimate for the metric was 3,111 units for $404,880 ASP.
Total home orders rose 14% from the prior year to 3,991 homes. In dollars, home orders increased 8% year over year to $1.63 billion. A 5% lower ASP of $409,000 due to both geographic and product mix shifts impacted growth to some extent. We estimated home orders to be up 5.5% year over year. Strong demand and the right amount of available inventory, which benefited from just an 8% cancelation rate, aided the quarterly sales order volume. Average absorptions per store was 4.9 per month, up 17% from 4.2 in the prior year. However, the average community count declined 1% year over year.
Entry-level buyers represented 91% of sales orders versus 87% in the year-ago period.
The quarter-end backlog totaled 3,033 units, down 23% year over year. The value of the backlog also decreased 29% year over year to $1.24 billion.
Adjusted home closing gross margin expanded 340 basis points (bps) to 25.8%. Selling, general and administrative expenses — as a percentage of home closing revenues — increased 10 bps to 10.4% from the prior-year quarter due to higher commission rates.
Financial Services: The segment’s revenues rose 11% from the prior-year quarter’s level to $6.35 million.
Balance Sheet
At the end of first-quarter 2024, cash and cash equivalents totaled $905.3 million compared with $921.2 million on Dec 31, 2023. At the end of March 2024, 66,400 lots were owned or controlled by the company compared with 60,900 lots a year ago.
Total debt to capital was 17.5% compared with 17.9% at 2023-end. Net debt to capital was 2% versus 1.9% on Dec 31, 2023.
Net cash provided by operating activities for the reported quarter was $81.9 million versus $124.5 million a year ago.
Recently, the company raised the quarterly cash dividend to 75 cents per share from 27 cents and paid dividends of $27.2 million in the first quarter. It repurchased 362,419 shares of its common stock for $55.9 million. As of Mar 31, 2024, $129.1 million in shares remained under the authorized share repurchase program.
2024 Outlook
Executive chairman of MTH, Steven J. Hilton, stated, “We entered the spring selling season with a healthy supply of available inventory and were able to capitalize on strong current market conditions stemming from the increasing need for housing from Millennials, Gen Z and the move-down Baby Boomers, all finding limited existing housing supply.”
MTH projects 14,500-15,000 home closings for the year, which is likely to generate home closing revenues of $6-$6.2 billion ($6.06 billion reported in 2023). Home closing gross margin is expected to be in the 24.5-25% range compared with 24.9% in 2023. It also expects EPS within $19.20-$20.70 compared with $19.93 reported in 2023. It estimates an effective tax rate of 22.5%.
PulteGroup Inc. (PHM - Free Report) reported stellar results in first-quarter 2024, wherein earnings and revenues surpassed the Zacks Consensus Estimate.
Also, both metrics increased year over year on favorable demand conditions and its balanced operating model, which allows the company to more effectively meet the individual needs of first-time, move-up and active-adult consumers.
D.R. Horton, Inc. (DHI - Free Report) reported second-quarter fiscal 2024 (ended Mar 31, 2024) results, with earnings and revenues surpassing Zacks Consensus Estimate.
On a year-over-year basis, both the top and bottom lines increased. The upside was backed by the supply of new and existing homes as affordable price points remain limited and robust housing demand is supported by favorable demographics amid elevated inflation and mortgage/interest rates.
NVR, Inc. (NVR - Free Report) reported impressive first-quarter 2024 results, with earnings and Homebuilding revenues surpassing the Zacks Consensus Estimate. The top and bottom lines increased on a year-over-year basis. The upside was backed by improved demand trends, which resulted in higher order volumes.
The company reported EPS of $116.41, which topped the consensus mark of $106.03 by 9.8%. The reported figure increased 17% from the prior-year quarter’s figure of $99.89 per share. Total revenues (Homebuilding & Mortgage Banking fees combined) amounted to $2.33 billion in the reported quarter, up 7% on a year-over-year basis.
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Meritage Homes (MTH) Q1 Earnings Beat, Orders & Backlog Up
Meritage Homes Corporation’s (MTH - Free Report) stock gained 12.7% in the after-hours trading session on Apr 24 after it reported impressive results for first-quarter 2024.
Both earnings and total closing revenues surpassed the Zacks Consensus Estimate and increased on a year-over-year basis. The upside was backed by higher deliveries.
Solid execution on its spec building and streamlined strategy helped it achieve yet another record backlog conversion rate of 138% and a return on equity of 18% during the quarter.
Earnings & Revenue Discussion
Earnings per share (EPS) of $5.06 beat the Zacks Consensus Estimate and the year-ago figure of $3.54 by 42.9%.
Meritage Homes Corporation Price, Consensus and EPS Surprise
Meritage Homes Corporation price-consensus-eps-surprise-chart | Meritage Homes Corporation Quote
Total revenues (including Homebuilding and Financial Services revenues) amounted to $1.472 billion, up 14.5% from $1.285 billion reported in the year-ago period.
Segment Discussion
Homebuilding: Total closing revenues were $1.468 billion, which grew 15% from the prior-year quarter’s level of $1.26 billion and beat the consensus mark of $1.28 billion by 14.5%.
Under the Homebuilding umbrella, home closing revenues totaled $1.466 billion, increasing 16% from the prior-year quarter’s level of $1.26 billion. Land closing revenues amounted to $2.31 million, which declined 87% from $17.4 million reported in the year-ago quarter.
MTH reported 3,507 units of homes closed, down 21% from 2,897 units year over year. The average sales price (ASP) was 4% lower from a year ago to $418,000 due to a product mix shift. ASP increased sequentially owing to reduced utilization of rate lock financing incentives and price increases. Our estimate for the metric was 3,111 units for $404,880 ASP.
Total home orders rose 14% from the prior year to 3,991 homes. In dollars, home orders increased 8% year over year to $1.63 billion. A 5% lower ASP of $409,000 due to both geographic and product mix shifts impacted growth to some extent. We estimated home orders to be up 5.5% year over year. Strong demand and the right amount of available inventory, which benefited from just an 8% cancelation rate, aided the quarterly sales order volume. Average absorptions per store was 4.9 per month, up 17% from 4.2 in the prior year. However, the average community count declined 1% year over year.
Entry-level buyers represented 91% of sales orders versus 87% in the year-ago period.
The quarter-end backlog totaled 3,033 units, down 23% year over year. The value of the backlog also decreased 29% year over year to $1.24 billion.
Adjusted home closing gross margin expanded 340 basis points (bps) to 25.8%. Selling, general and administrative expenses — as a percentage of home closing revenues — increased 10 bps to 10.4% from the prior-year quarter due to higher commission rates.
Financial Services: The segment’s revenues rose 11% from the prior-year quarter’s level to $6.35 million.
Balance Sheet
At the end of first-quarter 2024, cash and cash equivalents totaled $905.3 million compared with $921.2 million on Dec 31, 2023. At the end of March 2024, 66,400 lots were owned or controlled by the company compared with 60,900 lots a year ago.
Total debt to capital was 17.5% compared with 17.9% at 2023-end. Net debt to capital was 2% versus 1.9% on Dec 31, 2023.
Net cash provided by operating activities for the reported quarter was $81.9 million versus $124.5 million a year ago.
Recently, the company raised the quarterly cash dividend to 75 cents per share from 27 cents and paid dividends of $27.2 million in the first quarter. It repurchased 362,419 shares of its common stock for $55.9 million. As of Mar 31, 2024, $129.1 million in shares remained under the authorized share repurchase program.
2024 Outlook
Executive chairman of MTH, Steven J. Hilton, stated, “We entered the spring selling season with a healthy supply of available inventory and were able to capitalize on strong current market conditions stemming from the increasing need for housing from Millennials, Gen Z and the move-down Baby Boomers, all finding limited existing housing supply.”
MTH projects 14,500-15,000 home closings for the year, which is likely to generate home closing revenues of $6-$6.2 billion ($6.06 billion reported in 2023). Home closing gross margin is expected to be in the 24.5-25% range compared with 24.9% in 2023. It also expects EPS within $19.20-$20.70 compared with $19.93 reported in 2023. It estimates an effective tax rate of 22.5%.
Zacks Rank
Meritage Homes currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Peer Releases
PulteGroup Inc. (PHM - Free Report) reported stellar results in first-quarter 2024, wherein earnings and revenues surpassed the Zacks Consensus Estimate.
Also, both metrics increased year over year on favorable demand conditions and its balanced operating model, which allows the company to more effectively meet the individual needs of first-time, move-up and active-adult consumers.
D.R. Horton, Inc. (DHI - Free Report) reported second-quarter fiscal 2024 (ended Mar 31, 2024) results, with earnings and revenues surpassing Zacks Consensus Estimate.
On a year-over-year basis, both the top and bottom lines increased. The upside was backed by the supply of new and existing homes as affordable price points remain limited and robust housing demand is supported by favorable demographics amid elevated inflation and mortgage/interest rates.
NVR, Inc. (NVR - Free Report) reported impressive first-quarter 2024 results, with earnings and Homebuilding revenues surpassing the Zacks Consensus Estimate. The top and bottom lines increased on a year-over-year basis. The upside was backed by improved demand trends, which resulted in higher order volumes.
The company reported EPS of $116.41, which topped the consensus mark of $106.03 by 9.8%. The reported figure increased 17% from the prior-year quarter’s figure of $99.89 per share. Total revenues (Homebuilding & Mortgage Banking fees combined) amounted to $2.33 billion in the reported quarter, up 7% on a year-over-year basis.