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In the last reported quarter, the company’s earnings and Homebuilding revenues topped the Zacks Consensus Estimate by 41% and 26.4%, respectively. However, earnings and Homebuilding revenues declined 39% and 0.6% on a year-over-year basis.
Meritage Homes’ earnings topped the consensus mark in 19 of the trailing 20 quarters.
Trend in Estimate Revision
The Zacks Consensus Estimate for second-quarter 2023 earnings per share has increased to $3.49 from $3.47 over the past 30 days. The estimated figure indicates a 48.5% decline from the year-ago quarter’s reported value.
For Homebuilding revenues, the consensus mark is pegged at $1.31 billion, suggesting a decline of 7.2% from the year-ago quarter’s reported figure.
Key Factors to Note
Revenues
Meritage Homes’ Homebuilding revenues (accounted for 99.6% of total revenues in 2022) are expected to have declined in the second quarter on a year-over-year basis due to slow housing demand driven by high mortgage rates.
Also, Financial Services’ revenues (accounted for 0.4% of total revenues in 2022) are anticipated to have declined from the last year quarter’s level. However, the company’s strategic shift to a pure-play entry-level and first-move-up builder are likely to have aided it to partially overcome the ongoing economic uncertainties.
Segment-wise, for second-quarter 2023, our model predicts Homebuilding and Financial services revenues to decline 8.6% to $1.29 billion and 11.7% to $4.5 million, respectively, year over year.
Although Homebuilding revenues are expected to have been lower on a year-over-year basis, MTH is expected to generate sequentially higher revenues, given the lack of existing homes for sale.
Owing to the soft housing demand scenario, driven by persisting economic challenges, the company expects home closing to range within 2,800-3,100 units in the to-be-reported-quarter, down from the previous year’s reported value of 3,221 units. Also, home closing revenues are anticipated to be within $1.22 -$1.36 billion, down from prior year’s reported value of $1.41 billion.
We expect home closing units and revenues to decrease 8.8% to 2,937 units and 8.8% to $1.29 billion, respectively, year over year. However, we expect land closing revenues to increase 64% to $5.6 million.
Geographically, we expect home closing average selling price (ASP) in West and Central regions to increase year over year by 1.4% to $533,100 and 1.4% to $408,510, respectively. On the other hand, home closing ASP in the East region is anticipated to decline 2.2% to $392,150, year over year.
Margins
For the second quarter, earnings of MTH are likely to have been affected by the ongoing inflationary pressure, lower revenues, increased fuel and equipment costs, high labor expenses and insurance costs. These costs are expected to have had a negative impact on the company’s operations as well as hurt margins in the to-be-reported quarter.
Owing to the aforementioned headwinds, the company expects diluted earnings per share to be within $3.15-$3.65, down from last year quarter’s reported value of $6.77 per share. Furthermore, the company expects home closing gross margin to be around 22%, reflecting a decline from prior year’s value of 31.6%.
We expect home closing gross margin to decline 940 basis points to 22.2%, year over year.
Backlogs and Home Orders
Owing to the aforementioned economic uncertainties, for second-quarter 2023, we expect total backlog to decline 38.7% to 4,442 units as well as total backlog value to decline by 43.1% to $1.96 billion, year over year.
Geographically, we expect home orders in West, Central and East regions to decline 7.8% to 991 units, 4.4% to 1,048 units and 11.2% to 1,417 units, respectively, year over year.
What Our Model Unveils
Our proven model predicts an earnings beat for Meritage Homes for the quarter to be reported. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is exactly the case here, as you will see below.
Earnings ESP: MTH has an Earnings ESP of +0.98%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank of 2.
Other Stocks With Favorable Combination
Here are some other companies in the Zacks Construction sector, which according to our model, also have the right combination of elements to post an earnings beat for their respective quarters to be reported.
BCC’s earnings for the to-be-reported quarter are expected to decline 53.7%. The company reported better-than-expected earnings in three of the last four quarters and missed on one occasion, the average surprise being 19%.
Owens Corning (OC - Free Report) has an Earnings ESP of +2.10% and sports a Zacks Rank of 1.
OC’s earnings for the to-be-reported quarter are expected to decline 13.8%. The company reported better-than-expected earnings in the last four quarters, the average surprise being 15.1%.
Vulcan Materials Company (VMC - Free Report) has an Earnings ESP of +2.22% and a Zacks Rank of 3.
VMC is expected to register a 24.8% increase in earnings for the to-be-reported quarter. Notably, the company reported better-than-expected earnings in two of the last four quarters and missed on the other two occasions, the average surprise being 7.1%.
Image: Bigstock
Here's What to Expect From Meritage Homes' (MTH) Q2 Earnings
Meritage Homes Corporation (MTH - Free Report) is set to report second-quarter 2023 results on Jul 27, after market close.
In the last reported quarter, the company’s earnings and Homebuilding revenues topped the Zacks Consensus Estimate by 41% and 26.4%, respectively. However, earnings and Homebuilding revenues declined 39% and 0.6% on a year-over-year basis.
Meritage Homes’ earnings topped the consensus mark in 19 of the trailing 20 quarters.
Trend in Estimate Revision
The Zacks Consensus Estimate for second-quarter 2023 earnings per share has increased to $3.49 from $3.47 over the past 30 days. The estimated figure indicates a 48.5% decline from the year-ago quarter’s reported value.
Meritage Homes Corporation Price and EPS Surprise
Meritage Homes Corporation price-eps-surprise | Meritage Homes Corporation Quote
For Homebuilding revenues, the consensus mark is pegged at $1.31 billion, suggesting a decline of 7.2% from the year-ago quarter’s reported figure.
Key Factors to Note
Revenues
Meritage Homes’ Homebuilding revenues (accounted for 99.6% of total revenues in 2022) are expected to have declined in the second quarter on a year-over-year basis due to slow housing demand driven by high mortgage rates.
Also, Financial Services’ revenues (accounted for 0.4% of total revenues in 2022) are anticipated to have declined from the last year quarter’s level. However, the company’s strategic shift to a pure-play entry-level and first-move-up builder are likely to have aided it to partially overcome the ongoing economic uncertainties.
Segment-wise, for second-quarter 2023, our model predicts Homebuilding and Financial services revenues to decline 8.6% to $1.29 billion and 11.7% to $4.5 million, respectively, year over year.
Although Homebuilding revenues are expected to have been lower on a year-over-year basis, MTH is expected to generate sequentially higher revenues, given the lack of existing homes for sale.
Owing to the soft housing demand scenario, driven by persisting economic challenges, the company expects home closing to range within 2,800-3,100 units in the to-be-reported-quarter, down from the previous year’s reported value of 3,221 units. Also, home closing revenues are anticipated to be within $1.22 -$1.36 billion, down from prior year’s reported value of $1.41 billion.
We expect home closing units and revenues to decrease 8.8% to 2,937 units and 8.8% to $1.29 billion, respectively, year over year. However, we expect land closing revenues to increase 64% to $5.6 million.
Geographically, we expect home closing average selling price (ASP) in West and Central regions to increase year over year by 1.4% to $533,100 and 1.4% to $408,510, respectively. On the other hand, home closing ASP in the East region is anticipated to decline 2.2% to $392,150, year over year.
Margins
For the second quarter, earnings of MTH are likely to have been affected by the ongoing inflationary pressure, lower revenues, increased fuel and equipment costs, high labor expenses and insurance costs. These costs are expected to have had a negative impact on the company’s operations as well as hurt margins in the to-be-reported quarter.
Owing to the aforementioned headwinds, the company expects diluted earnings per share to be within $3.15-$3.65, down from last year quarter’s reported value of $6.77 per share. Furthermore, the company expects home closing gross margin to be around 22%, reflecting a decline from prior year’s value of 31.6%.
We expect home closing gross margin to decline 940 basis points to 22.2%, year over year.
Backlogs and Home Orders
Owing to the aforementioned economic uncertainties, for second-quarter 2023, we expect total backlog to decline 38.7% to 4,442 units as well as total backlog value to decline by 43.1% to $1.96 billion, year over year.
Geographically, we expect home orders in West, Central and East regions to decline 7.8% to 991 units, 4.4% to 1,048 units and 11.2% to 1,417 units, respectively, year over year.
What Our Model Unveils
Our proven model predicts an earnings beat for Meritage Homes for the quarter to be reported. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is exactly the case here, as you will see below.
Earnings ESP: MTH has an Earnings ESP of +0.98%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank of 2.
Other Stocks With Favorable Combination
Here are some other companies in the Zacks Construction sector, which according to our model, also have the right combination of elements to post an earnings beat for their respective quarters to be reported.
Boise Cascade Company (BCC - Free Report) has an Earnings ESP of +2.36% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
BCC’s earnings for the to-be-reported quarter are expected to decline 53.7%. The company reported better-than-expected earnings in three of the last four quarters and missed on one occasion, the average surprise being 19%.
Owens Corning (OC - Free Report) has an Earnings ESP of +2.10% and sports a Zacks Rank of 1.
OC’s earnings for the to-be-reported quarter are expected to decline 13.8%. The company reported better-than-expected earnings in the last four quarters, the average surprise being 15.1%.
Vulcan Materials Company (VMC - Free Report) has an Earnings ESP of +2.22% and a Zacks Rank of 3.
VMC is expected to register a 24.8% increase in earnings for the to-be-reported quarter. Notably, the company reported better-than-expected earnings in two of the last four quarters and missed on the other two occasions, the average surprise being 7.1%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.