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Meritage Homes (MTH) Lags on Q3 Earnings, Slashes 2018 View
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Meritage Homes Corporation (MTH - Free Report) reported third-quarter 2018 results, with both the top and bottom lines missing the Zacks Consensus Estimate. While net earnings of $1.33 per share missed the consensus mark of $1.37 per share by 2.9%, revenues of $884.6 million missed the same by 1.7%. The company also slashed its full-year guidance, considering the softness in the overall market owing to higher home prices and interest rate environment. Shares of Meritage Homes slipped 1.6% yesterday, following the earnings release.
Nonetheless, on a year-over-year basis, earnings increased 30% from the year-ago level of $1.02 per share. Also, revenues rose 9.8% from the year-ago figure of $805.6 million. The performance was primarily backed by a 10% rise in home closings. Meanwhile, the successful execution of strategic initiatives to boost profitability along with its focus on entry-level LiVE.NOW homes led to the upside.
Meritage Corporation Price, Consensus and EPS Surprise
Within the Homebuilding section, home closing revenues grew 9% year over year to $877.7 million, aided by higher home deliveries. Land closing revenues were $6.8 million, up from $0.6 million a year ago.
Home closings increased 10% to 2,162 homes, recording the second highest number of homes delivered in more than a decade, partially offset by a 1% decrease in average sales price. The company registered growth across all regions in Central and East, except West.
Total orders were down 2% to 1,828 homes due to a 42% decrease in average active communities in California. The value of net orders fell 6.5% to $715.1 million.
Revenues at the Financial Services segment increased 8% to $3.8 million.
Margins
Home sales gross margin of 18.1% was in line with the prior-year figure. Meanwhile, excluding $2.6 million termination charges of a purchase agreement for land in California, home sales gross margin expanded 10 basis points year over year to 18.4% in the quarter.
SG&A expenses, as a percentage of home closing revenues, were 11% versus 10.9% in the prior-year quarter.
Pre-tax earnings came in at $71.4 million, reflecting an increase of 12.5% from the year-ago period.
Balance Sheet
Meritage Homes’ cash and cash equivalents totaled $205.8 million as of Sep 30, 2018 compared with $170.7 million on Dec 31, 2017.
Meanwhile, the company repurchased its common stock of approximately $29.4 million, under the current authorization of $100 million.
Debt-to-capital ratios reduced to 43.4% as of Sep 30, 2018 from 44.9% on Dec 31, 2017. Also, net debt-to-capital ratios were down to 39.2% from 41.4%, in the said time frames.
2018 Guidance Lowered
The company anticipates home closing revenues within $3.375-3.475 billion (earlier expectation of $3.5-$3.65 billion). Homes closings are now expected within approximately 8,300-8,500 units compared with the prior guided range of 8,450-8,850 units.
The company now expects home sales gross margin of 18% (versus 18-18.5% projected earlier). Pre-tax profit is now expected between $265 million and $285 million ($295-$315 million expected earlier).
Zacks Rank & Key Picks
Meritage Homes currently carries a Zacks Rank #5 (Strong Sell).
Armstrong World, Continental Building and NCI Building’s 2018 earnings are expected to grow 23.5%, 52.6% and 81.3%, respectively.
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Meritage Homes (MTH) Lags on Q3 Earnings, Slashes 2018 View
Meritage Homes Corporation (MTH - Free Report) reported third-quarter 2018 results, with both the top and bottom lines missing the Zacks Consensus Estimate. While net earnings of $1.33 per share missed the consensus mark of $1.37 per share by 2.9%, revenues of $884.6 million missed the same by 1.7%. The company also slashed its full-year guidance, considering the softness in the overall market owing to higher home prices and interest rate environment. Shares of Meritage Homes slipped 1.6% yesterday, following the earnings release.
Nonetheless, on a year-over-year basis, earnings increased 30% from the year-ago level of $1.02 per share. Also, revenues rose 9.8% from the year-ago figure of $805.6 million. The performance was primarily backed by a 10% rise in home closings. Meanwhile, the successful execution of strategic initiatives to boost profitability along with its focus on entry-level LiVE.NOW homes led to the upside.
Meritage Corporation Price, Consensus and EPS Surprise
Meritage Corporation Price, Consensus and EPS Surprise | Meritage Corporation Quote
Home Closings and Orders
Within the Homebuilding section, home closing revenues grew 9% year over year to $877.7 million, aided by higher home deliveries. Land closing revenues were $6.8 million, up from $0.6 million a year ago.
Home closings increased 10% to 2,162 homes, recording the second highest number of homes delivered in more than a decade, partially offset by a 1% decrease in average sales price. The company registered growth across all regions in Central and East, except West.
Total orders were down 2% to 1,828 homes due to a 42% decrease in average active communities in California. The value of net orders fell 6.5% to $715.1 million.
Revenues at the Financial Services segment increased 8% to $3.8 million.
Margins
Home sales gross margin of 18.1% was in line with the prior-year figure. Meanwhile, excluding $2.6 million termination charges of a purchase agreement for land in California, home sales gross margin expanded 10 basis points year over year to 18.4% in the quarter.
SG&A expenses, as a percentage of home closing revenues, were 11% versus 10.9% in the prior-year quarter.
Pre-tax earnings came in at $71.4 million, reflecting an increase of 12.5% from the year-ago period.
Balance Sheet
Meritage Homes’ cash and cash equivalents totaled $205.8 million as of Sep 30, 2018 compared with $170.7 million on Dec 31, 2017.
Meanwhile, the company repurchased its common stock of approximately $29.4 million, under the current authorization of $100 million.
Debt-to-capital ratios reduced to 43.4% as of Sep 30, 2018 from 44.9% on Dec 31, 2017. Also, net debt-to-capital ratios were down to 39.2% from 41.4%, in the said time frames.
2018 Guidance Lowered
The company anticipates home closing revenues within $3.375-3.475 billion (earlier expectation of $3.5-$3.65 billion). Homes closings are now expected within approximately 8,300-8,500 units compared with the prior guided range of 8,450-8,850 units.
The company now expects home sales gross margin of 18% (versus 18-18.5% projected earlier). Pre-tax profit is now expected between $265 million and $285 million ($295-$315 million expected earlier).
Zacks Rank & Key Picks
Meritage Homes currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the Zacks Construction sector are Armstrong World Industries, Inc. (AWI - Free Report) , Continental Building Products, Inc. and NCI Building Systems, Inc. , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Armstrong World, Continental Building and NCI Building’s 2018 earnings are expected to grow 23.5%, 52.6% and 81.3%, respectively.
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