We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why Is Meritage (MTH) Up 1.3% Since Last Earnings Report?
Read MoreHide Full Article
It has been about a month since the last earnings report for Meritage Homes (MTH - Free Report) . Shares have added about 1.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Meritage due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Meritage Homes Corporation reported second-quarter 2019 results, wherein earnings and revenues surpassed the respective Zacks Consensus Estimate, buoyed by strong homebuying activity.
Earnings of $1.31 per share topped the consensus mark of $1.03 by 27.2%. However, the reported figure was in line with the year-ago profit level. Lower home closing revenues and increased interest and SG&A expenses were offset by higher gross margin.
Home closing revenues of $863.1 million surpassed the consensus mark of $805 million by 7.2% but decreased 1.1% year over year.
Segment Discussion
Homebuilding/Total Closing Revenues: Revenues from the segment decreased 1.5% from the prior-year quarter to $864.6 million, impacted by 6% reduced ASP, which offset the 5.3% increase in volume. Home closing revenues in the West region were down 14.5% from the year-ago level due to a 9% reduction in ASP and 7% drop in closings. The decrease in the West region was primarily due to softness in California.
Homes closed during the quarter came in at 2,253, up 5.3% year over year. Despite higher closings, revenues declined due to lower ASP that reflects the company’s ongoing strategic shift toward more affordable entry-level and first move-up homes at lower price points. Notably, its entry-level LiVE.NOW. homes represented 52% of second-quarter orders, increasing from 44% a year ago.
Total orders increased 21.6% from the year-ago level to 2,735 homes. The value of net orders also increased 13.7% year over year to $1.04 billion. Quarterly order volume marked a 13-year record high, driven by a 19% improvement in absorption pace and marginal increase in average community count.
However, land closing revenues of $1.6 million were significantly down from $5.1 million a year ago.
Financial Services: The segment’s revenues increased 7.5% from the prior-year level to $4.2 million.
Margins
Home closing gross margin improved 10 basis points (bps) to 18.4% from the prior-year figure. Selling, general and administrative expenses (as a percentage of home closing revenues) of 11% were up 10 bps from the prior-year figure of 10.9%.
Balance Sheet
As of Jun 30, 2019, cash and cash equivalents totaled $407.4 million compared with $311.5 million on Dec 31, 2018. The upside was backed by positive cash flow from operations.
As of Jun 30, 2019, debt-to-capital ratio of the company reduced to 42.1% from 43.2% on Dec 31, 2018. Also, net debt-to-capital ratio decreased to 33.4% from 36.7% on Dec 31.
2019 Guidance
Meritage Homes now expects full-year 2019 home closings in the range of 8,700-9,100 versus 8,200-8,700 projected earlier. The mid-point of the guided range is higher than the year-ago reported figure of 8,531 homes. The company expects total home closing revenues within $3.4-$3.6 billion versus $3.25-3.45 billion expected earlier. In 2018, it reported home closing revenues of $3.47 billion.
The company anticipates home closing gross margin in mid-18% and earnings within $5.20-$5.50 per share compared with $4.65-4.95 expected earlier. In 2018, the company had reported earnings of $5.58 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 11.28% due to these changes.
VGM Scores
Currently, Meritage has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Meritage has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Why Is Meritage (MTH) Up 1.3% Since Last Earnings Report?
It has been about a month since the last earnings report for Meritage Homes (MTH - Free Report) . Shares have added about 1.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Meritage due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Meritage Homes' (MTH - Free Report) Q2 Earnings Beat Estimates, View Up
Meritage Homes Corporation reported second-quarter 2019 results, wherein earnings and revenues surpassed the respective Zacks Consensus Estimate, buoyed by strong homebuying activity.
Earnings of $1.31 per share topped the consensus mark of $1.03 by 27.2%. However, the reported figure was in line with the year-ago profit level. Lower home closing revenues and increased interest and SG&A expenses were offset by higher gross margin.
Home closing revenues of $863.1 million surpassed the consensus mark of $805 million by 7.2% but decreased 1.1% year over year.
Segment Discussion
Homebuilding/Total Closing Revenues: Revenues from the segment decreased 1.5% from the prior-year quarter to $864.6 million, impacted by 6% reduced ASP, which offset the 5.3% increase in volume. Home closing revenues in the West region were down 14.5% from the year-ago level due to a 9% reduction in ASP and 7% drop in closings. The decrease in the West region was primarily due to softness in California.
Homes closed during the quarter came in at 2,253, up 5.3% year over year. Despite higher closings, revenues declined due to lower ASP that reflects the company’s ongoing strategic shift toward more affordable entry-level and first move-up homes at lower price points. Notably, its entry-level LiVE.NOW. homes represented 52% of second-quarter orders, increasing from 44% a year ago.
Total orders increased 21.6% from the year-ago level to 2,735 homes. The value of net orders also increased 13.7% year over year to $1.04 billion. Quarterly order volume marked a 13-year record high, driven by a 19% improvement in absorption pace and marginal increase in average community count.
However, land closing revenues of $1.6 million were significantly down from $5.1 million a year ago.
Financial Services: The segment’s revenues increased 7.5% from the prior-year level to $4.2 million.
Margins
Home closing gross margin improved 10 basis points (bps) to 18.4% from the prior-year figure. Selling, general and administrative expenses (as a percentage of home closing revenues) of 11% were up 10 bps from the prior-year figure of 10.9%.
Balance Sheet
As of Jun 30, 2019, cash and cash equivalents totaled $407.4 million compared with $311.5 million on Dec 31, 2018. The upside was backed by positive cash flow from operations.
As of Jun 30, 2019, debt-to-capital ratio of the company reduced to 42.1% from 43.2% on Dec 31, 2018. Also, net debt-to-capital ratio decreased to 33.4% from 36.7% on Dec 31.
2019 Guidance
Meritage Homes now expects full-year 2019 home closings in the range of 8,700-9,100 versus 8,200-8,700 projected earlier. The mid-point of the guided range is higher than the year-ago reported figure of 8,531 homes. The company expects total home closing revenues within $3.4-$3.6 billion versus $3.25-3.45 billion expected earlier. In 2018, it reported home closing revenues of $3.47 billion.
The company anticipates home closing gross margin in mid-18% and earnings within $5.20-$5.50 per share compared with $4.65-4.95 expected earlier. In 2018, the company had reported earnings of $5.58 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 11.28% due to these changes.
VGM Scores
Currently, Meritage has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Meritage has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.