As the Q1 earnings season comes to a close, it’s time to take stock of 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 10 home builders stocks we track reported a slower Q1. As a group, revenues were in line with analysts’ consensus estimates.
In light of this news, share prices of the companies have held steady as they are up 2.5% on average since the latest earnings results.
Meritage Homes (NYSE:MTH)
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 $1.36 billion, down 7.5% year on year. This print exceeded analysts’ expectations by 2.4%. Despite the top-line beat, it was still a mixed quarter for the company with full-year revenue guidance beating analysts’ expectations but a significant miss of analysts’ backlog estimates.
"Meritage had a healthy start to 2025, selling almost 3,900 homes in the first quarter despite a slower start to the year. We achieved an average absorption pace of 4.4 net sales per month this quarter, overcoming still-elevated mortgage rates and increasing macroeconomic concerns," said Steven J. Hilton, executive chairman of Meritage Homes.
Meritage Homes Total Revenue
Meritage Homes scored the highest full-year guidance raise of the whole group. Unsurprisingly, the stock is up 4.3% since reporting and currently trades at $71.07.
Named “America’s Most Trusted Home Builder” in 2019, Taylor Morrison Home (NYSE:TMHC) builds single family homes and communities across the United States.
Taylor Morrison Home reported revenues of $1.90 billion, up 11.5% year on year, outperforming analysts’ expectations by 5.7%. The business had a strong quarter with a solid beat of analysts’ EBITDA estimates.
Taylor Morrison Home Total Revenue
Taylor Morrison Home scored the biggest analyst estimates beat and fastest revenue growth among its peers. The market seems content with the results as the stock is up 4.1% since reporting. It currently trades at $61.23.
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 $351.4 million, down 10.1% year on year, falling short of analysts’ expectations by 5%. It was a disappointing quarter as it posted a significant miss of analysts’ adjusted operating income estimates.
Interestingly, the stock is up 4.1% since the results and currently trades at $61.62.
Established in 2015 following a spinoff from Masco Corporation, TopBuild (NYSE:BLD) is a distributor and installer of insulation and other building products.
TopBuild reported revenues of $1.23 billion, down 3.6% year on year. This result was in line with analysts’ expectations. Zooming out, it was a satisfactory quarter as it also recorded an impressive beat of analysts’ adjusted operating income estimates.
The stock is up 7.3% since reporting and currently trades at $313.15.
The first homebuilder to be listed on the NYSE, KB Home (NYSE:KB) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.
KB Home reported revenues of $1.39 billion, down 5.2% year on year. This number came in 6.5% below analysts' expectations. Overall, it was a disappointing quarter as it also produced full-year revenue guidance missing analysts’ expectations.
KB Home had the weakest performance against analyst estimates among its peers. The stock is down 9.4% since reporting and currently trades at $56.
The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.
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