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Meritage Homes (MTH) Beats Q2 Earnings & Revenue Estimates
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Meritage Homes Corporation (MTH - Free Report) came up with a solid performance in the second quarter of 2018. Earnings and revenues surpassed the Zacks Consensus Estimate, courtesy of a solid housing market scenario. Meanwhile, successful execution of strategic initiatives to boost profitability along with focus on entry-level LiVE.NOW. homes led to the upside.
However, share price of Meritage Homes slipped 4.1% yesterday, as new-home sales for the month of June fell to an eight-month low. Major homebuilding companies recorded a decline in the early afternoon trading session yesterday following the news, overshadowing the strong second-quarter results of the industry so far.
Earnings & Revenue Discussion
The company reported earnings of $1.31 per share, surpassing the Zacks Consensus Estimate of $1.10 by 19.1%. Earnings increased 34% from the year-ago profit level of 98 cents.
Homebuilding revenues of $872.4 million surpassed the consensus mark of $833 million and also increased 9.4% from $797.8 million a year ago. Notably, LiVE.NOW. made up 44% of its orders in the second quarter compared with just 35% a year ago.
Home Closings and Orders
Homebuilding revenues of $877.5 million increased 9.4% from the prior-year quarter. Home closing revenues increased 9.4% year over year to $872.4 million, aided by higher home deliveries. Land/lot closing revenues were $5.1 million, up from $4.2 million a year ago.
Home closings increased 12% to 2,139 homes and 9% to $872.4 million in value. The company registered growth across all regions comprising Central and East, except West. Average selling price for the homes closed, however, slipped 3% in the quarter.
Total orders increased 5% to 2,250 homes on continued improvement. Orders increased across all operating regions (barring West). The value of net orders grew 4% to $918 million.
Quarter-end sales order backlog (under contract) increased 6% to 3,619 homes. Backlog value increased 6% to $1.53 billion.
Revenues at the Financial Services segment increased 6.1% to $3.9 million.
Margins
Home sales gross margin expanded 60 basis points (bps) year over year to 18.3% in the quarter. The improvement was due to higher margins in the East region. SG&A expenses increased 30 bps from the prior-year quarter to 10.9%, as a percentage of home closing revenues.
Pre-tax earnings came in at $71.2 million, reflecting an increase of 13% from the year-earlier period. This uptick stemmed from higher home closing revenues and home closing gross margin.
Meritage Corporation Price, Consensus and EPS Surprise
Meritage Homes’ cash and cash equivalents totaled $169.4 million as of Jun 30, 2018 compared with $170.7 million on Dec 31, 2017.
Debt-to-capital ratios were 43.8% as of Jun 30, 2018 and 44.9% on Dec 31, 2017, respectively. Meanwhile, net debt-to-capital ratios were 40.4% and 41.4%, respectively, in the said time frames, within management’s targeted range.
2018 Guidance Reiterated
The company anticipates home closing revenues within $3.5-$3.65 billion. Homes closings are expected within 8,450-8,850 units.
This Zacks Rank #2 (Buy) company now expects home sales gross margin between 18% and 18.5% (versus at least 18% expected earlier), buoyed by strong second-quarter results. Pre-tax profit is now expected between $295 million and $315 million (up from $285-$305 million expected earlier).
NVR, Inc. (NVR - Free Report) reported second-quarter 2018 earnings of $49.05 per share, beating the Zacks Consensus Estimate of $46.21 by 6.2%. Earnings increased 39% from the prior-year quarter, primarily owing to a lower tax rate.
KB Home’s (KBH - Free Report) second-quarter fiscal 2018 earnings of 57 cents per share outpaced the Zacks Consensus Estimate of 49 cents by 16.3% and increased significantly by 72.7% from 33 cents recorded in the year-ago period.
Lennar Corporation’s (LEN - Free Report) second-quarter adjusted earnings of $1.58 per share surpassed the Zacks Consensus Estimate of 45 cents. The reported figure mainly excludes integration costs related to the acquisition of CalAtlantic Group, Inc. and backlog/construction in progress write-up related to purchase accounting. Including these items, the reported figure came in at 94 cents per share in the quarter, increasing considerably from the year-ago profit level of 89 cents per share.
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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Meritage Homes (MTH) Beats Q2 Earnings & Revenue Estimates
Meritage Homes Corporation (MTH - Free Report) came up with a solid performance in the second quarter of 2018. Earnings and revenues surpassed the Zacks Consensus Estimate, courtesy of a solid housing market scenario. Meanwhile, successful execution of strategic initiatives to boost profitability along with focus on entry-level LiVE.NOW. homes led to the upside.
However, share price of Meritage Homes slipped 4.1% yesterday, as new-home sales for the month of June fell to an eight-month low. Major homebuilding companies recorded a decline in the early afternoon trading session yesterday following the news, overshadowing the strong second-quarter results of the industry so far.
Earnings & Revenue Discussion
The company reported earnings of $1.31 per share, surpassing the Zacks Consensus Estimate of $1.10 by 19.1%. Earnings increased 34% from the year-ago profit level of 98 cents.
Homebuilding revenues of $872.4 million surpassed the consensus mark of $833 million and also increased 9.4% from $797.8 million a year ago. Notably, LiVE.NOW. made up 44% of its orders in the second quarter compared with just 35% a year ago.
Home Closings and Orders
Homebuilding revenues of $877.5 million increased 9.4% from the prior-year quarter. Home closing revenues increased 9.4% year over year to $872.4 million, aided by higher home deliveries. Land/lot closing revenues were $5.1 million, up from $4.2 million a year ago.
Home closings increased 12% to 2,139 homes and 9% to $872.4 million in value. The company registered growth across all regions comprising Central and East, except West. Average selling price for the homes closed, however, slipped 3% in the quarter.
Total orders increased 5% to 2,250 homes on continued improvement. Orders increased across all operating regions (barring West). The value of net orders grew 4% to $918 million.
Quarter-end sales order backlog (under contract) increased 6% to 3,619 homes. Backlog value increased 6% to $1.53 billion.
Revenues at the Financial Services segment increased 6.1% to $3.9 million.
Margins
Home sales gross margin expanded 60 basis points (bps) year over year to 18.3% in the quarter. The improvement was due to higher margins in the East region. SG&A expenses increased 30 bps from the prior-year quarter to 10.9%, as a percentage of home closing revenues.
Pre-tax earnings came in at $71.2 million, reflecting an increase of 13% from the year-earlier period. This uptick stemmed from higher home closing revenues and home closing gross margin.
Meritage Corporation Price, Consensus and EPS Surprise
Meritage Corporation Price, Consensus and EPS Surprise | Meritage Corporation Quote
Balance Sheet
Meritage Homes’ cash and cash equivalents totaled $169.4 million as of Jun 30, 2018 compared with $170.7 million on Dec 31, 2017.
Debt-to-capital ratios were 43.8% as of Jun 30, 2018 and 44.9% on Dec 31, 2017, respectively. Meanwhile, net debt-to-capital ratios were 40.4% and 41.4%, respectively, in the said time frames, within management’s targeted range.
2018 Guidance Reiterated
The company anticipates home closing revenues within $3.5-$3.65 billion. Homes closings are expected within 8,450-8,850 units.
This Zacks Rank #2 (Buy) company now expects home sales gross margin between 18% and 18.5% (versus at least 18% expected earlier), buoyed by strong second-quarter results. Pre-tax profit is now expected between $295 million and $315 million (up from $285-$305 million expected earlier).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Peer Releases
NVR, Inc. (NVR - Free Report) reported second-quarter 2018 earnings of $49.05 per share, beating the Zacks Consensus Estimate of $46.21 by 6.2%. Earnings increased 39% from the prior-year quarter, primarily owing to a lower tax rate.
KB Home’s (KBH - Free Report) second-quarter fiscal 2018 earnings of 57 cents per share outpaced the Zacks Consensus Estimate of 49 cents by 16.3% and increased significantly by 72.7% from 33 cents recorded in the year-ago period.
Lennar Corporation’s (LEN - Free Report) second-quarter adjusted earnings of $1.58 per share surpassed the Zacks Consensus Estimate of 45 cents. The reported figure mainly excludes integration costs related to the acquisition of CalAtlantic Group, Inc. and backlog/construction in progress write-up related to purchase accounting. Including these items, the reported figure came in at 94 cents per share in the quarter, increasing considerably from the year-ago profit level of 89 cents per share.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>