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Meritage Homes (MTH) Q3 Earnings Top Estimates, Rise Y/Y
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Meritage Homes Corporation (MTH - Free Report) reported third-quarter 2020 results, wherein earnings and revenues not only surpassed the Zacks Consensus Estimate but also improved significantly on a year-over-year basis.
Earnings & Revenue Discussion
Meritage Homes reported earnings of $2.84 per share, which topped the Zacks Consensus Estimate of $2.42 by an impressive 17.4% and increased a whopping 58.7% year over year. The uptrend can be primarily attributed to solid home closing revenues and high gross margins.
Total revenues (including Homebuilding and Financial Services revenues) amounted to $1.14 billion, up 20.9% from the year-ago level backed by stronger market demand and lower mortgage interest rates.
Meritage Homes Corporation Price, Consensus and EPS Surprise
Homebuilding: The segments revenues in the third quarter totaled $1,138.1 million, up 21% from the prior-year level of $940.9 million. Home closing revenues totaled $1,133.2 million, up 21% year over year. The upside can be attributed to a 24% increase in volumes. Average sales price or ASP fell 3% year over year due to a strategic shift in the entry-level market.
During the third quarter, the company reported homes closed of 3,004 units, up 24% year over year. Total home orders increased 71% from the prior year to 3,851 homes backed by a 94% rise in absorptions. Notably, high demand was witnessed for Meritage's entry-level LiVE.NOW product that accounted for almost 70% of third-quarter orders, compared with 54% recorded in the prior-year quarter. California generated the highest absorptions in the quarter.
Meanwhile, value of net orders increased 73% year over year to $1.5 billion. Quarter-end backlog totaled 5,242 units, up 49% year over year. Value of the backlog also increased 44% year over year despite a 4% decrease in ASP.
During the third quarter, home closing gross margin increased 170 basis points (bps) to 21.5% from 19.8% reported in the year-ago quarter. This improvement stemmed from strategic streamlining of operations, partially offset by high lumber prices. Selling, general and administrative expenses — as a percentage of home closing revenues — decreased 70 bps year over year to 10.1%.
Land closing revenues amounted to $4.9 million, up 187.3% from $1.7 million in the year-ago quarter.
Financial Services: The segment’s revenues increased 14% from the prior-year level to $4.9 million.
Balance Sheet
As of Sep 30, 2020, cash and cash equivalents totaled $610 million compared with $319.5 million as on Dec 31, 2019.
At quarter-end, the company had nearly 48,000 total lots owned or under control compared with 37,000 at the end of third-quarter 2019.
Total debt to capital at the end of the quarter was 31.7% compared with 34% at 2019-end. Net debt to capital declined to 15.7% from 26.2% on Dec 31, 2019.
Guidance
Based on the current market scenario, Meritage Homes believes that it can generate $4.2 -4.4 billion in home closing revenues in 2020. Also, it expects home closing gross margins around 21-21.5% for 2020. It projects earnings within $10.25-$10.50 per share for 2020.
KB Home (KBH - Free Report) reported third-quarter fiscal 2020 (ended Aug 31, 2020) results, wherein both earnings and revenues topped the Zacks Consensus Estimate on solid housing gross margin.
Lennar Corporation (LEN - Free Report) — currently carrying a Zacks Rank #1 — reported better-than-expected results for third-quarter fiscal 2020 (ended Aug 31, 2020). The quarterly results benefited from robust housing market fundamentals backed by low interest rates and persistent undersupply of new as well as existing inventory. Also, solid execution of homebuilding and financial services businesses added to the positives.
NVR, Inc. (NVR - Free Report) reported better-than-expected results for third-quarter 2020, wherein earnings and revenues topped the Zacks Consensus Estimate. The quarterly results benefited solid housing market fundamentals in the United States, courtesy of low mortgage rates.
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Meritage Homes (MTH) Q3 Earnings Top Estimates, Rise Y/Y
Meritage Homes Corporation (MTH - Free Report) reported third-quarter 2020 results, wherein earnings and revenues not only surpassed the Zacks Consensus Estimate but also improved significantly on a year-over-year basis.
Earnings & Revenue Discussion
Meritage Homes reported earnings of $2.84 per share, which topped the Zacks Consensus Estimate of $2.42 by an impressive 17.4% and increased a whopping 58.7% year over year. The uptrend can be primarily attributed to solid home closing revenues and high gross margins.
Total revenues (including Homebuilding and Financial Services revenues) amounted to $1.14 billion, up 20.9% from the year-ago level backed by stronger market demand and lower mortgage interest rates.
Meritage Homes Corporation Price, Consensus and EPS Surprise
Meritage Homes Corporation price-consensus-eps-surprise-chart | Meritage Homes Corporation Quote
Segment Discussion
Homebuilding: The segments revenues in the third quarter totaled $1,138.1 million, up 21% from the prior-year level of $940.9 million. Home closing revenues totaled $1,133.2 million, up 21% year over year. The upside can be attributed to a 24% increase in volumes. Average sales price or ASP fell 3% year over year due to a strategic shift in the entry-level market.
During the third quarter, the company reported homes closed of 3,004 units, up 24% year over year. Total home orders increased 71% from the prior year to 3,851 homes backed by a 94% rise in absorptions. Notably, high demand was witnessed for Meritage's entry-level LiVE.NOW product that accounted for almost 70% of third-quarter orders, compared with 54% recorded in the prior-year quarter. California generated the highest absorptions in the quarter.
Meanwhile, value of net orders increased 73% year over year to $1.5 billion. Quarter-end backlog totaled 5,242 units, up 49% year over year. Value of the backlog also increased 44% year over year despite a 4% decrease in ASP.
During the third quarter, home closing gross margin increased 170 basis points (bps) to 21.5% from 19.8% reported in the year-ago quarter. This improvement stemmed from strategic streamlining of operations, partially offset by high lumber prices. Selling, general and administrative expenses — as a percentage of home closing revenues — decreased 70 bps year over year to 10.1%.
Land closing revenues amounted to $4.9 million, up 187.3% from $1.7 million in the year-ago quarter.
Financial Services: The segment’s revenues increased 14% from the prior-year level to $4.9 million.
Balance Sheet
As of Sep 30, 2020, cash and cash equivalents totaled $610 million compared with $319.5 million as on Dec 31, 2019.
At quarter-end, the company had nearly 48,000 total lots owned or under control compared with 37,000 at the end of third-quarter 2019.
Total debt to capital at the end of the quarter was 31.7% compared with 34% at 2019-end. Net debt to capital declined to 15.7% from 26.2% on Dec 31, 2019.
Guidance
Based on the current market scenario, Meritage Homes believes that it can generate $4.2 -4.4 billion in home closing revenues in 2020. Also, it expects home closing gross margins around 21-21.5% for 2020. It projects earnings within $10.25-$10.50 per share for 2020.
Zacks Rank & Peer Releases
Meritage Homes currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
KB Home (KBH - Free Report) reported third-quarter fiscal 2020 (ended Aug 31, 2020) results, wherein both earnings and revenues topped the Zacks Consensus Estimate on solid housing gross margin.
Lennar Corporation (LEN - Free Report) — currently carrying a Zacks Rank #1 — reported better-than-expected results for third-quarter fiscal 2020 (ended Aug 31, 2020). The quarterly results benefited from robust housing market fundamentals backed by low interest rates and persistent undersupply of new as well as existing inventory. Also, solid execution of homebuilding and financial services businesses added to the positives.
NVR, Inc. (NVR - Free Report) reported better-than-expected results for third-quarter 2020, wherein earnings and revenues topped the Zacks Consensus Estimate. The quarterly results benefited solid housing market fundamentals in the United States, courtesy of low mortgage rates.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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