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Meritage Homes (MTH) Q4 Earnings & Revenues Beat, Orders Up
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Meritage Homes Corporation (MTH - Free Report) reported better-than-expected results for fourth-quarter 2023. Both earnings and total closing revenues surpassed the Zacks Consensus Estimate.
Earnings and total revenues declined on a year-over-year basis. Also, total closing revenues fell due to reduced home prices and volume, along with increased financing incentives and higher lot costs.
The stock lost 2.5% in the after-hours trading session on Jan 31.
Earnings & Revenue Discussion
Earnings of $5.38 per share topped the Zacks Consensus Estimate of $5.18 by 3.9% but declined 24% year over year from $7.09 reported a year ago.
Meritage Homes Corporation Price, Consensus and EPS Surprise
Total revenues (including Homebuilding and Financial Services revenues) amounted to $1.66 billion compared with $1.99 billion reported in the year-ago period.
Segment Discussion
Homebuilding: Total closing revenues were $1.65 billion, down 17% from the prior-year quarter’s level. The metric, however, beat the consensus mark of $1.52 billion by 8.6%.
Under the Homebuilding umbrella, home closing revenues totaled $1.64 billion, declining 17% from the prior-year quarter’s level of $1.98 billion. Land closing revenues amounted to $11.7 million, increasing 59% from $7.3 million reported in the year-ago quarter.
MTH reported 3,951 units of homes closed, down 13% from 4,540 units year over year. The average sales price (ASP) was 5% lower from a year ago to $415,000 due to costlier financing incentives and geographic mix. Our estimate for the metric was 3,608 units for $417,140 ASP.
Total home orders rose 60% from the prior year to 2,892 homes on healthy homebuying demand owing to below-7% interest rates and recovering consumer confidence. We estimated home orders to be up 94.6% year over year. In dollars, home orders increased 70% year over year to $1.2 billion on a 6% higher ASP of $415,000. Average absorptions per store was 3.6 per month, up 64% from 2.2 per month in the previous year. However, the average community count declined 1% year over year.
Entry-level buyers represented 88% of sales orders for the current as well as the year-ago period.
The quarter-end backlog totaled 2,549 units, down 23% year over year. The value of the backlog also decreased 29% year over year to $1.09 billion.
Adjusted home closing gross margin contracted 300 basis points (bps) to 25.4%. Selling, general and administrative expenses — as a percentage of home closing revenues — increased 230 bps to 10.7% from the prior-year quarter due to higher performance-based compensation costs, higher commission rates and reduced leverage from lower home closing revenue.
Financial Services: The segment’s revenues fell 2% from the prior-year quarter’s level to $7.2 million.
2023 Highlights
Total closing revenues for 2023 came in at $6.06 billion, down 2% from the 2022 level on a 1% lower home closing volume and a 2% low ASP. Earnings of $19.93 per share declined 25% year over year.
Total home orders of 13,193 homes in 2023 were higher than the 11,759 reported in 2022. Home order value also grew 8% from 2022.
For 2023, the home closing gross margin contracted 400 bps to 24.9% compared with 28.9% in 2022. SG&A expenses (as a percentage of home closing revenues) were up 190 bps to 10.2% compared with 8.3% in 2022.
Balance Sheet
At the end of 2023, cash and cash equivalents totaled $921.2 million compared with $861.6 million on Dec 31, 2022. At the end of 2023, 64,300 lots were owned or controlled by the company compared with 63,200 lots a year ago.
Total debt to capital was 17.9% compared with 22.6% at 2022-end. Net debt to capital was 1.9% versus 6.8% on Dec 31, 2022.
Net cash provided by operating activities for 2023 was $355.6 million versus $405.3 million a year ago.
MTH repurchased 437,882 shares of its common stock for $59.1 million in 2023. As of Dec 31, 2023, $185 million in shares remained under the authorized share repurchase program.
PulteGroup Inc. (PHM - Free Report) reported mixed results in fourth-quarter 2023, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Both metrics decreased year over year.
Nonetheless, during the latter part of the fourth quarter, PulteGroup observed a notable surge in buyer activity, mainly attributed to declining interest rates. December emerged as the quarter's peak sales month. With the anticipation of sustained lower interest rates in 2024, the company remains optimistic that the enhanced affordability landscape will continue to attract prospective buyers.
NVR, Inc. (NVR - Free Report) reported mixed fourth-quarter 2023 results, with earnings surpassing the Zacks Consensus Estimate and Homebuilding revenues missing the same. Both the top and bottom lines decreased on a year-over-year basis due to softened housing demand, given higher mortgage rates during the period.
The company reported earnings of $121.56 per share, which topped the consensus mark of $118.63 by 2.9%. The reported figure decreased 9% from the prior-year quarter’s figure of $133.44 per share. Total revenues (Homebuilding & Mortgage Banking fees combined) amounted to $2.43 billion for the reported quarter, indicating a decline of 10% on a year-over-year basis.
M.D.C. Holdings, Inc. reported better-than-expected results for fourth-quarter 2023. Its earnings topped the Zacks Consensus Estimate and increased year over year. Revenues surpassed the consensus estimate but declined year over year.
MDC’s uptrend can be attributed to the current new home market, which continues to benefit from the lack of existing home supply. The company witnessed notable improvements in its net new orders. This was driven by a significant decline in cancelations and its use of financing incentives aimed at reducing the negative impact of higher mortgage rates for its buyers.
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Meritage Homes (MTH) Q4 Earnings & Revenues Beat, Orders Up
Meritage Homes Corporation (MTH - Free Report) reported better-than-expected results for fourth-quarter 2023. Both earnings and total closing revenues surpassed the Zacks Consensus Estimate.
Earnings and total revenues declined on a year-over-year basis. Also, total closing revenues fell due to reduced home prices and volume, along with increased financing incentives and higher lot costs.
The stock lost 2.5% in the after-hours trading session on Jan 31.
Earnings & Revenue Discussion
Earnings of $5.38 per share topped the Zacks Consensus Estimate of $5.18 by 3.9% but declined 24% year over year from $7.09 reported a year ago.
Meritage Homes Corporation Price, Consensus and EPS Surprise
Meritage Homes Corporation price-consensus-eps-surprise-chart | Meritage Homes Corporation Quote
Total revenues (including Homebuilding and Financial Services revenues) amounted to $1.66 billion compared with $1.99 billion reported in the year-ago period.
Segment Discussion
Homebuilding: Total closing revenues were $1.65 billion, down 17% from the prior-year quarter’s level. The metric, however, beat the consensus mark of $1.52 billion by 8.6%.
Under the Homebuilding umbrella, home closing revenues totaled $1.64 billion, declining 17% from the prior-year quarter’s level of $1.98 billion. Land closing revenues amounted to $11.7 million, increasing 59% from $7.3 million reported in the year-ago quarter.
MTH reported 3,951 units of homes closed, down 13% from 4,540 units year over year. The average sales price (ASP) was 5% lower from a year ago to $415,000 due to costlier financing incentives and geographic mix. Our estimate for the metric was 3,608 units for $417,140 ASP.
Total home orders rose 60% from the prior year to 2,892 homes on healthy homebuying demand owing to below-7% interest rates and recovering consumer confidence. We estimated home orders to be up 94.6% year over year. In dollars, home orders increased 70% year over year to $1.2 billion on a 6% higher ASP of $415,000. Average absorptions per store was 3.6 per month, up 64% from 2.2 per month in the previous year. However, the average community count declined 1% year over year.
Entry-level buyers represented 88% of sales orders for the current as well as the year-ago period.
The quarter-end backlog totaled 2,549 units, down 23% year over year. The value of the backlog also decreased 29% year over year to $1.09 billion.
Adjusted home closing gross margin contracted 300 basis points (bps) to 25.4%. Selling, general and administrative expenses — as a percentage of home closing revenues — increased 230 bps to 10.7% from the prior-year quarter due to higher performance-based compensation costs, higher commission rates and reduced leverage from lower home closing revenue.
Financial Services: The segment’s revenues fell 2% from the prior-year quarter’s level to $7.2 million.
2023 Highlights
Total closing revenues for 2023 came in at $6.06 billion, down 2% from the 2022 level on a 1% lower home closing volume and a 2% low ASP. Earnings of $19.93 per share declined 25% year over year.
Total home orders of 13,193 homes in 2023 were higher than the 11,759 reported in 2022. Home order value also grew 8% from 2022.
For 2023, the home closing gross margin contracted 400 bps to 24.9% compared with 28.9% in 2022. SG&A expenses (as a percentage of home closing revenues) were up 190 bps to 10.2% compared with 8.3% in 2022.
Balance Sheet
At the end of 2023, cash and cash equivalents totaled $921.2 million compared with $861.6 million on Dec 31, 2022. At the end of 2023, 64,300 lots were owned or controlled by the company compared with 63,200 lots a year ago.
Total debt to capital was 17.9% compared with 22.6% at 2022-end. Net debt to capital was 1.9% versus 6.8% on Dec 31, 2022.
Net cash provided by operating activities for 2023 was $355.6 million versus $405.3 million a year ago.
MTH repurchased 437,882 shares of its common stock for $59.1 million in 2023. As of Dec 31, 2023, $185 million in shares remained under the authorized share repurchase program.
Zacks Rank & Peer Releases
Meritage Homes currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PulteGroup Inc. (PHM - Free Report) reported mixed results in fourth-quarter 2023, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Both metrics decreased year over year.
Nonetheless, during the latter part of the fourth quarter, PulteGroup observed a notable surge in buyer activity, mainly attributed to declining interest rates. December emerged as the quarter's peak sales month. With the anticipation of sustained lower interest rates in 2024, the company remains optimistic that the enhanced affordability landscape will continue to attract prospective buyers.
NVR, Inc. (NVR - Free Report) reported mixed fourth-quarter 2023 results, with earnings surpassing the Zacks Consensus Estimate and Homebuilding revenues missing the same. Both the top and bottom lines decreased on a year-over-year basis due to softened housing demand, given higher mortgage rates during the period.
The company reported earnings of $121.56 per share, which topped the consensus mark of $118.63 by 2.9%. The reported figure decreased 9% from the prior-year quarter’s figure of $133.44 per share. Total revenues (Homebuilding & Mortgage Banking fees combined) amounted to $2.43 billion for the reported quarter, indicating a decline of 10% on a year-over-year basis.
M.D.C. Holdings, Inc. reported better-than-expected results for fourth-quarter 2023. Its earnings topped the Zacks Consensus Estimate and increased year over year. Revenues surpassed the consensus estimate but declined year over year.
MDC’s uptrend can be attributed to the current new home market, which continues to benefit from the lack of existing home supply. The company witnessed notable improvements in its net new orders. This was driven by a significant decline in cancelations and its use of financing incentives aimed at reducing the negative impact of higher mortgage rates for its buyers.