Latest news with #MeritageHomes
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New home being built with wood plank, trusses and assorted supplies I originally made Meritage Homes (MTH) a Long Idea in June 2020 and reiterated my bullish thesis on the stock many times since.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
20-05-2025
- Business
- Yahoo
Meritage Homes Extends Partnership with Operation Homefront, Donating Two Mortgage-Free Homes to Military Families in Colorado and North Carolina
The homebuilder's 12th year partnering with Operation Homefront's Permanent Homes for Veterans program SCOTTSDALE, Ariz., May 20, 2025 (GLOBE NEWSWIRE) -- Meritage Homes has extended its partnership with Operation Homefront's Permanent Homes for Veterans Program to donate two brand new, mortgage-free homes for veteran families in Colorado Springs, Colorado and Raleigh, North Carolina. This marks the Company's 12th year partnering with the organization and 22 total donations to date. 'We are honored to deliver new homes to deserving military families who have given so much to our country. It's a privilege for us to help them achieve a fresh start to a new future and build roots in their communities,' shares Phillippe Lord, CEO of Meritage Homes. 'Thank you to our employees and trade partners for their time and effort. We're proud to continue our long-standing partnership with Operation Homefront and look forward to welcoming this year's recipients into their new, mortgage-free Meritage homes.' The new homes will be in the Lorson Ranch community located in Colorado Springs, CO and in the River Glen community in Angier, NC. Both homes offer an open-concept floorplan with designer-curated interiors and energy-efficient features, including ENERGY STAR® appliances, a multispeed HVAC system, and spray-foam insulation. Each house is also outfitted with a smart home suite that gives homeowners the ability to set the thermostat, control security devices and more through a convenient app. This year's recipients will be announced in September and presented the keys at ceremonies in November around Veterans Day. 'We are grateful for Meritage Homes' unwavering commitment to our mission to build strong, stable and secure military families,' said Rear Adm. Alan Reyes, US Navy (Ret.), Operation Homefront President & CEO. 'Each family receives more than a house, they are being given a place to call home, where they can gather to establish new traditions, create beautiful memories and realize life-changing dreams with generational impact.' For more information about the Meritage's partnership with Operation Homefront, please visit: About Meritage Homes Corporation: Meritage is the fifth-largest public homebuilder in the United States, based on homes closed in 2024. The Company offers energy-efficient and affordable entry-level and first move-up homes. Operations span across Arizona, California, Colorado, Utah, Tennessee, Texas, Alabama, Florida, Georgia, Mississippi, North Carolina, and South Carolina. Meritage has delivered almost 200,000 homes in its 40-year history, and has a reputation for its distinctive style, quality construction, and award-winning customer experience. The Company is an industry leader in energy-efficient homebuilding, an eleven-time recipient of the U.S. Environmental Protection Agency's (EPA) ENERGY STAR® Partner of the Year for Sustained Excellence Award and Residential New Construction Market Leader Award, as well as a four-time recipient of the EPA's Indoor airPLUS Leader Award. For more information, visit About Operation Homefront: Operation Homefront is a national nonprofit organization whose mission is to build strong, stable, and secure military families so that they can thrive – not simply struggle to get by – in the communities they have worked so hard to protect. Recognized for superior performance by leading independent charity oversight groups, 83 percent of Operation Homefront expenditures go directly to programs that support tens of thousands of military families each year. Operation Homefront provides critical financial assistance, transitional and permanent housing, and family support services to prevent short-term needs from turning into chronic, long-term struggles. Thanks to the generosity of our donors and the support from thousands of volunteers, Operation Homefront proudly serves America's military families. For more information, visit Contact:Emily Tadano, VP Investor Relations and External Communications (480) 515-8979 media@
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
Yahoo
22-04-2025
- Business
- Yahoo
Meritage Homes (MTH) Q1 Earnings Report Preview: What To Look For
Homebuilder Meritage Homes (NYSE:MTH) will be reporting earnings tomorrow after market close. Here's what to look for. Meritage Homes beat analysts' revenue expectations by 2.9% last quarter, reporting revenues of $1.62 billion, down 2.3% year on year. It was a mixed quarter for the company, with an impressive beat of analysts' adjusted operating income estimates but a significant miss of analysts' backlog estimates. Is Meritage Homes a buy or sell going into earnings? Read our full analysis here, it's free. This quarter, analysts are expecting Meritage Homes's revenue to decline 9.7% year on year to $1.33 billion, a reversal from the 14.8% increase it recorded in the same quarter last year. Adjusted earnings are expected to come in at $1.68 per share. Analysts covering the company have generally reconfirmed their estimates over the last 30 days, suggesting they anticipate the business to stay the course heading into earnings. Meritage Homes has a history of exceeding Wall Street's expectations, beating revenue estimates every single time over the past two years by 10.1% on average. Looking at Meritage Homes's peers in the home builders segment, some have already reported their Q1 results, giving us a hint as to what we can expect. Lennar delivered year-on-year revenue growth of 4.4%, beating analysts' expectations by 2%, and D.R. Horton reported a revenue decline of 15.1%, falling short of estimates by 3.9%. Lennar traded down 4% following the results while D.R. Horton was up 2.7%. Read our full analysis of Lennar's results here and D.R. Horton's results here. Inflation has progressed towards the Fed's 2% goal as of late, leading to strong stock market performance. Recent rate cuts and the 2024 Presidential election's conclusion added further sparks to the market, and while some of the home builders stocks have shown solid performance, the group has generally underperformed, with share prices down 11.3% on average over the last month. Meritage Homes is down 10.6% during the same time and is heading into earnings with an average analyst price target of $95.84 (compared to the current share price of $65.50). Unless you've been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. We prefer a lesser-known (but still profitable) semiconductor stock benefiting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.
Yahoo
02-04-2025
- Business
- Yahoo
Home Builders Stocks Q4 Results: Benchmarking Meritage Homes (NYSE:MTH)
As the Q4 earnings season wraps, let's dig into this quarter's best and worst performers in the home builders industry, including Meritage Homes (NYSE:MTH) and its peers. Traditionally, homebuilders have built competitive advantages with economies of scale that lead to advantaged purchasing and brand recognition among consumers. Aesthetic trends have always been important in the space, but more recently, energy efficiency and conservation are driving innovation. However, these companies are still at the whim of the macro, specifically interest rates that heavily impact new and existing home sales. In fact, homebuilders are one of the most cyclical subsectors within industrials. The 12 home builders stocks we track reported a slower Q4. As a group, revenues beat analysts' consensus estimates by 1.2%. Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 7.8% since the latest earnings results. Originally founded in 1985 in Arizona as Monterey Homes, Meritage Homes (NYSE:MTH) is a homebuilder specializing in designing and constructing energy-efficient and single-family homes in the US. Meritage Homes reported revenues of $1.62 billion, down 2.3% year on year. This print exceeded analysts' expectations by 2.9%. Despite the top-line beat, it was still a mixed quarter for the company with a solid beat of analysts' adjusted operating income estimates but a significant miss of analysts' backlog estimates. MANAGEMENT COMMENTS"2024 was another record-setting year for Meritage as we began to roll out our new move-in ready strategy and were able to capitalize on continuing demand for affordable, immediately available homes. For the full year 2024, we generated our highest annual closing volume of 15,611 homes and, despite a pullback in average sales price, we achieved a company-high home closing revenue of $6.3 billion," said Steven J. Hilton, executive chairman of Meritage Homes. The stock is down 9.7% since reporting and currently trades at $71.22. Read our full report on Meritage Homes here, it's free. Founded in 1951, Champion Homes (NYSE:SKY) is a manufacturer of modular homes and buildings in North America. Champion Homes reported revenues of $644.9 million, up 15.3% year on year, outperforming analysts' expectations by 9.2%. The business had an incredible quarter with a solid beat of analysts' sales volume estimates and an impressive beat of analysts' EPS estimates. Although it had a fine quarter compared to its peers, the market seems unhappy with the results as the stock is down 1.2% since reporting. It currently trades at $91.66. Is now the time to buy Champion Homes? Access our full analysis of the earnings results here, it's free. Started by two brothers who started by building and selling just one home in Pennsylvania, today Toll Brothers (NYSE:TOL) is a luxury homebuilder across the United States. Toll Brothers reported revenues of $1.86 billion, down 4.6% year on year, falling short of analysts' expectations by 2.9%. It was a disappointing quarter as it posted a significant miss of analysts' EBITDA and EPS estimates. As expected, the stock is down 13.9% since the results and currently trades at $105.05. Read our full analysis of Toll Brothers's results here. Based in Texas, LGI Homes (NASDAQ:LGIH) is a homebuilding company specializing in constructing affordable, entry-level single-family homes in desirable communities across the United States. LGI Homes reported revenues of $557.4 million, down 8.4% year on year. This result came in 11% below analysts' expectations. Overall, it was a disappointing quarter as it also recorded a significant miss of analysts' adjusted operating income estimates. LGI Homes had the weakest performance against analyst estimates and slowest revenue growth among its peers. The stock is down 14.3% since reporting and currently trades at $65.16. Read our full, actionable report on LGI Homes here, it's free. One of the largest homebuilders in America, Lennar (NYSE:LEN) is known for constructing affordable, move-up, and retirement homes across a range of markets and communities. Lennar reported revenues of $7.63 billion, up 4.4% year on year. This print surpassed analysts' expectations by 2%. More broadly, it was a mixed quarter as it also logged a solid beat of analysts' EPS estimates but a miss of analysts' backlog estimates. The stock is down 4.6% since reporting and currently trades at $114.51. Read our full, actionable report on Lennar here, it's free. Want to invest in winners with rock-solid fundamentals? Check out our Hidden Gem Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate. Join Paid Stock Investor Research Help us make StockStory more helpful to investors like yourself. Join our paid user research session and receive a $50 Amazon gift card for your opinions. Sign up here. Sign in to access your portfolio
