Latest news with #MTH
Forbes
3 days ago
- Business
- Forbes
Meritage Homes: A Building Stock For All Seasons
New home being built with wood plank, trusses and assorted supplies I originally made Meritage Homes (MTH) a Long Idea in June 2020 and reiterated my bullish thesis on the stock many times since. Meritage Homes, is steadily taking market share, building and delivering homes faster, all the while returning capital to shareholders through dividends and repurchases. Despite an uncertain housing outlook in the short-term, my thesis remains intact, and the stock remains undervalued. In the latest housing supply update, Freddie Mac estimated that the U.S. housing market was undersupplied by 3.7 million units as of 3Q24. The shortage of homes is a key driver of decreased housing affordability in the country. Put simply, when supply doesn't increase enough to meet demand, prices (home and rent) rise. As the 5th largest homebuilder in the U.S., Meritage Homes' products remain in strong demand, throughout all economic cycles, because everyone needs a place to live. Meritage Homes is in an advantageous position even as housing prices and interest rates remain high. The average sales price of new houses sold in the U.S. sits ~$404k in March 2025, up from ~$332k in February 2020, just before the COVID-19 pandemic sent home prices soaring. Entry-level homes, in which Meritage specializes, present a more viable and affordable option for any potential homebuyer. In fact, Meritage Homes' homes closed (finished homes delivered to the customer) grew from 7,709 in 2017 to 15,520 in the TTM ending 1Q25. In turn, the company's market share of U.S. new one family homes increased from 1.3% in 2017 to 2.3% in the TTM. See Figure 1. Figure 1: Meritage Homes' Share of U.S. New One Family Homes Sold: 2017 – TTM MTH Market Share 2017-TTM In 1Q25, Meritage Homes recorded its second highest first quarter orders and closings in company history. Meritage Homes' spec home strategy, which offers move-in ready homes available to close within 60 days, speeds up the buying process. Essentially, this strategy shortens the time between home sale and home closing, and it can help target incentives and promotions to specific market conditions. Of the homes closed in 1Q25, approximately 61% were sold within the same quarter, up from 48% in the prior year period. The company also achieved a record backlog (homes sold but not yet delivered) conversion rate of 221% in 1Q25, up from the 138% in 1Q24. Backlog refers to homes under contract that are not yet closed. It's important to note that the decrease in Meritage Homes' backlog is not due to a decrease in demand, but rather due to a strategic pivot to shorten the sales cycle and sell homes later in the construction cycle. When combining the number of homes in backlog and spec homes in inventory in 1Q25, Meritage has ~5 month supply, which is within the company's preferred range of 4-6 month supply. Figure 2: Meritage Homes' Total Specs & Ending Backlog: 1Q24 – 1Q25 MTH Inventory 1Q24-1Q25 Meritage Homes' fundamentals have been improving over the years. The company has grown revenue and net operating profit after-tax (NOPAT) by 11% and 17% respectively from 2014 through the TTM ended 1Q25. The company's NOPAT margin improved from 7% in 2014 to 11% in the TTM, while invested capital turns fell from 1.5 to 1.2 over the same time. Rising NOPAT margins are enough to offset falling invested capital turns and drive Meritage Homes' return on invested capital (ROIC) from 10% in 2014 to 13% in the TTM. Additionally, the company's Core Earnings, a proven superior earnings measure that excludes unusual gains/losses, grew 17% compounded annually from 2014 through the TTM ended 1Q25. See Figure 3. While below 2022 highs, Meritage Homes' TTM ended 1Q25 Core Earnings are still higher than any annual period between 1998-2020. Figure 3: Meritage Homes' Revenue and Core Earnings: 2014 – TTM MTH Core Earnings and Revenue 2014-TTM Meritage Homes started paying dividends at the beginning of 2023. Since then, Meritage Homes paid $179 million (4% of market cap) in cumulative dividends and increased its quarterly dividend from $0.14/share in 1Q23 to $0.43/share in 1Q25. The company's current dividend, when annualized, provides a 2.5% dividend yield. Though Meritage Homes started paying dividends relatively recently, it's been returning capital to shareholders via share buybacks for much longer. From 2019 through 1Q25, the company repurchased shares worth $486 million (10% of market cap). Since February 2019, Meritage Homes' Board of Directors has authorized the repurchase shares worth up to $750 million, with no specified expiration date. At the end of 1Q25, the company remains authorized to repurchase shares worth up to $264 million. Should the company repurchase shares at its TTM (ending 1Q25) rate, it would repurchase $115 million of shares over the next twelve months, which equals 2.3% of the current market cap. When combined, the dividend and share repurchase yield could reach 4.8%. Meritage Homes generates strong free cash flow (FCF) that covers both its share repurchases and regular dividend payments. From 2019 through 1Q25, Meritage Homes generated $1.1 billion (26% of enterprise value) in FCF while returning $665 million over the same time ($179 million in dividends and $486 million in repurchases). I like companies that choose to return capital to shareholders instead of spending it on costly executive bonuses or acquisitions that rarely drive shareholder value creation. See Figure 4. Figure 4: Meritage Homes' Cumulative FCF Since 2019 MTH Cumulative Free Cash Flow 2019-1Q25 Mortgage rates have risen significantly from the record lows of 2021, when the 30-year fixed rate mortgage (FRM) was around 2.2% and the 15-year FRM was around 2.7%. In May of 2025, Freddie Mac estimates that the average 30-year FRM sits at 6.8% and the average 15-year FRM sits at 5.9% in May 2025. See Figure 5. High mortgage rates make purchasing a home more expensive and present a headwind to all builders. Unfortunately, the easiest solution to aid consumers during times of high interest rates is to offer incentives and rate-buydowns, which create a drag on profitability. Figure 5: 30- and 15-Year Fixed Rate Mortgage: May 2020 – May 2025 Mortgage Rates Past Five Years In the 1Q25 earnings call, Meritage Homes' management noted that they don't yet know to what degree tariff-related cost increases will impact margins the remainder of the year. However, management also noted that 'the current status quo of no tariffs on lumber should get us most of our expected 2025 closings completed at current market lumber prices.' The company also intends to 'leverage its bargaining power with national vendors' given its large scale, limited floor plans, and high level of product visibility. Due to the high interest and mortgage rates, many homebuilders have increased incentives and rate buydowns, which negatively impact margins. Meritage Homes' average selling price (ASP) on home closings, home orders, and home backlogs fell 6%, 2%, and 1% YoY in 1Q25, respectively. Management noted that this decline was driven by 'increased utilization of financial incentives'. We can see the impact of these incentives in Meritage Homes' NOPAT margin, which fell from 12% in 1Q24 to 8.6% in 1Q25. In the company's 1Q25 earnings call, management noted: 'we anticipate the using of pricing incentives to remain elevated for the near future.' The good news is that the impact of lower margins, and any general housing downturn, are already more than priced into MTH at its current price. Details below. At its current price of $67/share, MTH has a price-to-economic book value (PEBV) ratio of 0.7. This ratio means the market expects the company's profits to permanently fall 30% from current levels. For context, Meritage Homes has grown NOPAT by 21% compounded annually over the last five years and 17% compounded annually over the last ten years. Perhaps even more impressive, the company has grown NOPAT 9% compounded annually over the past two decades. Below, I use my reverse discounted cash flow (DCF) model to analyze expectations for different stock price scenarios for MTH. In the first scenario, I quantify the expectations baked into the current price. If I assume: the stock is worth $68/share today – nearly equal to the current stock price. In this scenario, Meritage Homes' NOPAT falls 5% compounded annually from 2025 – 2034. In this scenario, Meritage Homes' NOPAT would equal $471 million in 2034, or 32% below its TTM NOPAT. If I instead assume: the stock is worth $97/share today – a 45% upside to the current price. In this scenario, Meritage Homes' NOPAT would fall <1% compounded annually through 2034. Should the company's NOPAT grow more in line with historical levels, the stock has even more upside. Furthermore, I think companies with long track records of profit growth deserve premium stock valuations, especially in a market filled with so many underperforming companies. Figure 6 compares Meritage Homes' historical NOPAT to the NOPAT implied in each of the above scenarios. Figure 6: Meritage Homes' Historical and Implied NOPAT: DCF Valuation Scenarios MTH DCF Implied NOPAT
Yahoo
13-05-2025
- Business
- Yahoo
MTH Q1 Earnings Call: Meritage Homes Focuses on Community Growth Amid Market Volatility
Homebuilder Meritage Homes (NYSE:MTH) reported revenue ahead of Wall Street's expectations in Q1 CY2025, but sales fell by 7.5% year on year to $1.36 billion. The company's full-year revenue guidance of $6.75 billion at the midpoint came in 1.5% above analysts' estimates. Its non-GAAP profit of $1.69 per share was 0.9% above analysts' consensus estimates. Is now the time to buy MTH? Find out in our full research report (it's free). Revenue: $1.36 billion vs analyst estimates of $1.33 billion (7.5% year-on-year decline, 2.4% beat) Adjusted EPS: $1.69 vs analyst estimates of $1.68 (0.9% beat) Adjusted EBITDA: $165.4 million vs analyst estimates of $170.7 million (12.1% margin, 3.1% miss) The company reconfirmed its revenue guidance for the full year of $6.75 billion at the midpoint Operating Margin: 11%, down from 15.3% in the same quarter last year Free Cash Flow was -$48.14 million, down from $75.75 million in the same quarter last year Backlog: $812.4 million at quarter end, down 34.7% year on year Market Capitalization: $4.9 billion Meritage Homes' first quarter results reflected the company's strategic emphasis on rapid inventory turnover and affordable, move-in-ready homes. Management attributed the quarter's performance to a 60-day closing commitment, enhanced use of financing incentives, and a growing community count. CEO Phillippe Lord explained, 'Our strategy is intentionally agile and we constantly are reviewing our start cadence and land spend,' highlighting the importance of adaptability in the face of macroeconomic uncertainty and shifting homebuyer sentiment. Looking ahead, Meritage Homes' forward guidance relies heavily on the anticipated double-digit increase in community count and continued demand for affordable new homes. Management reaffirmed full-year revenue expectations, with CFO Hilla Sferruzza noting, "We typically see a pop in volume when we open up a community," and emphasized that community openings—rather than improved market conditions—will be the main driver of growth. The company remains cautious about potential headwinds, such as evolving tariffs and macroeconomic volatility, but expressed confidence in its current strategy and market positioning. Meritage Homes' leadership connected first quarter performance to operational agility, product positioning, and strategic land acquisitions, while addressing the effects of a volatile housing market and heightened affordability concerns. Rapid backlog conversion: The company's 60-day closing commitment led to a record-high backlog conversion rate, allowing Meritage to quickly turn speculative inventory into sales and closings, which management cited as a key differentiator. Incentive-driven affordability: Increased use of financing incentives, particularly rate buy-downs, helped address affordability challenges for homebuyers without widespread price cuts; these incentives were more prevalent in markets facing greater consumer hesitation. Community count expansion: A notable driver of current and future growth was the double-digit year-over-year increase in community count, including new communities in the Gulf Coast and Nashville following targeted land acquisitions. Operational cost management: Cost reductions in direct construction expenses were achieved through purchasing negotiations and scale, partially offsetting lower margins due to higher incentives and reduced leverage of fixed costs. Resilient supply chain and labor: Stable labor availability and steady cycle times benefited Meritage, with management citing industry-wide pullbacks in new construction as providing slack in labor markets. The company reported no major disruptions from recent immigration policy changes or supply chain bottlenecks. Meritage Homes' outlook for the remainder of the year centers on expanding its community footprint and maintaining sales momentum through affordability initiatives, while monitoring risks from interest rates, tariffs, and consumer sentiment. Community growth as primary lever: Management expects the majority of revenue and volume growth to come from a higher number of new communities, particularly those with move-in-ready inventory, rather than assuming improved seasonal demand patterns. Affordability and incentives: The ongoing use of rate buy-downs and selective price increases in certain markets will be key to sustaining homebuyer activity, as the company adapts to persistent affordability constraints and fluctuating mortgage rates. Cost and margin risks: Potential future tariffs on materials and ongoing macroeconomic uncertainty represent risks to gross margins, although current supply chain stability and labor availability are expected to support operational execution for the near term. Unidentified Analyst (Zelman & Associates): Asked about higher average closing prices implied in the full-year outlook; management clarified the increase is mainly due to product mix rather than broad-based pricing power. Alan (Analyst): Inquired about the sustainability of incentive levels throughout the year; management indicated incentives would remain elevated and would be adjusted based on mortgage rate volatility and market conditions. Stephen Kim (Evercore ISI): Questioned the timing and expected impact of community count growth; management stated most new communities would open in the second half of the year, driving volume through initial high absorption rates. Michael Rehaut (JPMorgan): Pressed on Meritage's ability to maintain full-year guidance amid industry volatility; management emphasized confidence in its move-in-ready strategy and double-digit community growth as key factors. Trevor Allinson (Wolf Research): Sought insights on the competitive advantage of the 60-day closing commitment; management responded that this certainty, combined with financing incentives, differentiates Meritage from resale and peer offerings. In the coming quarters, the StockStory team will be monitoring (1) the pace and success of new community openings, especially in high-growth regions like the Gulf Coast and Nashville, (2) the evolution of incentive strategies and their impact on margins as interest rates fluctuate, and (3) any signs of supply chain or labor disruptions as the broader housing market responds to ongoing economic and policy shifts. Additionally, we will assess the impact of any new tariffs or regulatory changes on cost structure and gross margins. Meritage Homes currently trades at a forward P/E ratio of 7.6×. In the wake of earnings, is it a buy or sell? Find out in our free research report. Donald Trump's victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs. While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years. Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Chicago Tribune
24-04-2025
- Automotive
- Chicago Tribune
Column: With firefighting helicopter refill pump, Plano company can claim ‘coolest thing made in Illinois'
MTH Pumps, which makes its products in a non-descript metal building in Plano, may not sound like that cool of a company. But the aerial firefighting helicopter refill pump that's produced there has just been named 'The Coolest Thing Made in Illinois,' an award presented recently by Gov. JB Pritzker during a ceremony at the Governor's Mansion in Springfield, which was hosted by the Illinois Manufacturers' Association and sponsored by Comcast Business. Out of more than 250 entries, the MTH pump received the most of the 411,000 votes that were cast through the eight- week competition, according to an Illinois Manufacturers' Association press release. Just as the name implies, the pump is designed to reduce the refill time of helicopter-based water tanks from over a minute to as little as 30 seconds, increasing the number of water drops that aerial firefighters can place on a wildfire. Which, of course, improves chances of slowing or stopping the flames from spreading; When wildfires in California left a trail of destruction, noted the press release, 'MTH Pumps helped by providing more rapid and reliable water access for the aerial firefighters.' Battling hot blazes is indeed pretty cool. But what I also found interesting after talking to Tim Tremain, president of MTH, is that the Plano facility has been making this product for nearly two decades – after a Washington state company asked for a faster pump to battle wildfires – and engineering manager Greg Rittgers accepted the challenge. Which leads to an obvious question: What took so long for the 2025 winner of this bracketed Makers Madness contest to take home the cool prize? Turns out it all comes down to timing – and marketing. In the first five years the Illinois Manufacturers' Association has been sponsoring this competition – Caterpillar's mining truck was a previous champ – MTH always submitted one of its top-selling pumps and 'the product we want to grow, which is used by data centers to save energy when air conditioners are running in those massive buildings.' Sounds practical, for sure. Still, the coolest thing about that pump is the temperature it helps control. Firefighting, however, is a whole different story. Indeed, battling wildfires has been in the news in a spectacular way, particularly in the Los Angeles area, where nearly three weeks of blazes in January killed more than two dozen people and destroyed more than 18,000 homes and structures. Even though the firefighting pump is not MTH's main product – less than 200 have been sold in 20 years – Tremain and his top people figured 'why not give it a shot' in this sixth annual contest. Things really fell into place, he added, when Dart Aerospace, a helicopter company that uses these Plano-built pumps, was praised by L.A. firefighters for the product's impact on the critical job they performed this year. Tremain's marketing crew not only called upon West Coast firefighters to support the MTH entry in this coolest-thing contest, 'we tapped into other firefighters,' including those in Illinois, he said, estimating that of the 6,000 votes cast for the top four finalists, 'we got about 1,600 … 52 more' than the second place finisher. 'I even had my dental office voting for me,' Tremain quipped. In all seriousness, the MTH president's main purpose for entering the contest was to help employees understand the importance of the work they do day in and day out. 'Traditionally, we run under the radar,' he said, noting this was a big win for small businesses. 'When people drive by, they only see a non-descript metal building, not a company with the most advanced manufacturing equipment in the country right here in Plano. 'Because we are always looking for new employees – and looking to grow – it's nice to have people start recognizing the good things we are doing over there.' What's also really cool? His father Dave Tremain, a mechanical engineer who started the company back in 1965 with that first drawing of a pump, is 93 years old but still comes to work every day. After the elder Tremain retired and turned the company over to his son, an electrical engineer, he 'got bored and started a couple more businesses,' said Tim, who describes his father as 'the real entrepreneur.' Tremain still thinks 'the data center pump is a cool story,' noting that it can also cross over to medical pumps which are part of incubators and MRI machines. 'Those are saving lives too,' he pointed out. 'But helicopters dropping water on wildfires … that makes for a lot better video.'
San Francisco Chronicle
23-04-2025
- Business
- San Francisco Chronicle
Meritage: Q1 Earnings Snapshot
SCOTTSDALE, Ariz. (AP) — SCOTTSDALE, Ariz. (AP) — Meritage Homes Corp. (MTH) on Wednesday reported first-quarter earnings of $122.8 million. The Scottsdale, Arizona-based company said it had profit of $1.69 per share. The results fell short of Wall Street expectations. The average estimate of nine analysts surveyed by Zacks Investment Research was for earnings of $1.71 per share. The homebuilder posted revenue of $1.36 billion in the period, which beat Street forecasts. Nine analysts surveyed by Zacks expected $1.34 billion.
Yahoo
10-04-2025
- Business
- Yahoo
Zacks.com featured highlights Meritage Homes, Zoom, Edison, Super Micro Computer and Coherent
Chicago, IL – April 10, 2025 – Stocks in this week's article are Meritage Homes Corp. MTH, Zoom Communications Inc. ZM, Edison International EIX, Super Micro Computer Inc. SMCI and Coherent Corp. COHR. Markets began 2025 on a strong footing but have since been gripped by heightened volatility. On April 2, President Donald Trump's announcement of sweeping 'Liberation Day' tariffs triggered global disruption, marking the onset of a new trade war. In the aftermath, uncertainty has clouded expectations around the tariffs' potential impact on the U.S. economy and the Federal Reserve's monetary policy decisions. Amid this backdrop, investors are approaching the markets with increased caution. Therefore, the conventional method of selecting stocks is the need of the hour. One such way is choosing stocks with steady sales growth. In this regard, Meritage Homes Corp., Zoom Communications Inc., Edison International, Super Micro Computer Inc. and Coherent Corp. are worth investing. When evaluating a company, revenues often receive more scrutiny than earnings. Investors focus on a business's ability to generate increasing sales over time, as this shows its potential to expand the customer base. In contrast, stagnant or declining sales growth may signal underlying challenges. While a company can still generate short-term profits, sustained growth is necessary to attract new investors. Robust revenue growth is also essential for long-term profitability. While earnings can be improved by cutting costs, consistent bottom-line expansion typically requires steady sales increases. Nonetheless, sales growth alone doesn't provide a clear picture of a company's financial health. Evaluating a company's cash position alongside its revenues is a more effective investment strategy. A strong cash balance and steady cash flow provide flexibility for strategic decisions, operational stability and future investments. Scottsdale, AZ-based Meritage Homes is one of the leading designers and builders of single-family homes. MTH is primarily engaged in building and selling single-family homes for entry-level, first-time, move-up, luxury and active adult buyers in historically high-growth regions of the United States. Meritage Homes' expected sales growth rate for 2025 is 5%. The stock carries a Zacks Rank #2 at present. Zoom, based in San Jose, CA, provides an artificial intelligence-first work platform for human connection. ZM serves individuals and education, entertainment/media, enterprise infrastructure, finance, government, healthcare, manufacturing, non-profit/not-for-profit and social impact, retail/consumer products and software/Internet industries. Zoom's expected sales growth rate for 2025 is 2.7%. The stock currently carries a Zacks Rank #2. Rosemead, CA-based Edison is engaged in the generation and distribution of electric power. EIX is the parent holding company of Southern California Edison and Edison Energy. Edison's sales are expected to rise 2.2% in 2025. The stock carries a Zacks Rank #2 at present. Super Micro, based in San Jose, CA, designs, develops, manufactures and sells energy-efficient, application-optimized server solutions based on the x86 architecture. SMCI's solutions include a range of rack mount and blade server systems, as well as components. Super Micro's expected sales growth for 2025 is 59.2%. The company, at present, carries a Zacks Rank #2. Saxonburg, PA-based Coherent develops, manufactures and markets engineered materials, optoelectronic components and devices, and optical and laser systems and subsystems. COHR operates through three segments: Networking, Materials and Lasers. Coherent's sales are expected to jump 21% in fiscal 2025. The stock carries a Zacks Rank #2 at present. Get the remaining stock on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software. The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out. Click here to sign up for a free trial of the Research Wizard today. For the rest of this Screen of the Week article please visit at: Follow us on Twitter: Join us on Facebook: Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates. Contact: Jim Giaquinto Company: Phone: 312-265-9268 Email: pr@ Visit: provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit for information about the performance numbers displayed in this press release. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Edison International (EIX) : Free Stock Analysis Report Meritage Homes Corporation (MTH) : Free Stock Analysis Report Super Micro Computer, Inc. (SMCI) : Free Stock Analysis Report Coherent Corp. (COHR) : Free Stock Analysis Report Zoom Communications, Inc. (ZM) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
