Meritage Homes Corporation MTH reported fourth-quarter 2024 results, wherein earnings and total closing revenues topped the Zacks Consensus Estimate but declined year over year. This is the eighth consecutive quarter of earnings and revenues beat.
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Meritage Homes had a strong 2024, driven by high demand for affordable, entry-level homes, which made up 91% of fourth-quarter sales. Operational efficiencies helped sustain profitability despite a decline in average sales prices. Strategic land acquisitions, including Elliott Homes, expanded its future pipeline. Yet, challenges remain, including lower average sales prices (ASPs), lower backlog, and rising lot costs, which pressured margins.
With demographic tailwinds supporting entry-level housing and a disciplined approach to land investment, Meritage Homes appears well-positioned for another solid year.
Meritage Homes Corporation Price, Consensus and EPS Surprise
Meritage Homes Corporation Price, Consensus and EPS Surprise
Meritage Homes Corporation price-consensus-eps-surprise-chart | Meritage Homes Corporation Quote
MTH’s Earnings & Revenue Discussion
Earnings per share (EPS) of $4.72 topped the Zacks Consensus Estimate by a solid 113.6%. The reported figure decreased 12% from the year-ago quarter’s reported EPS of $5.38.
Total revenues (including Total Closing revenues and Financial Services revenues) amounted to $1.62 billion, down 2.3% from $1.66 billion reported in the year-ago period.
Segment Details of MTH’s Quarterly Release
Total Closing Revenues: Total closing revenues were $1.61 billion, which declined 2% from the prior-year quarter’s level but topped the consensus mark of $1.57 billion by 2.8%.
Under the Homebuilding umbrella, home closing revenues of $1.595 billion declined 3% from the prior-year quarter’s level due to lower ASPs. Land closing revenues, however, grew 49% to $17.4 million from a year ago.
Meritage Homes reported 4,044 units of homes closed, up 2% from the year-ago quarter. The ASP of homes closing declined 5% from a year ago to $395,000 due to product and geographic mix. Our model’s estimate for the metric was 3,882 units for an ASP of $402,580.
Total home orders inched up 14% from the prior year to 3,304 homes. In dollars, home orders increased 10% year over year to $1.32 billion. A 4% lower ASP of orders of $400,000 due to both geographic and product mix shifts impacted growth to some extent. We estimated home orders to be up 24% year over year. The average absorption pace was 3.9 per month in the quarter, up 8% from the last year.
Entry-level buyers represented 91% of sales orders compared with 88% in the year-ago period. The quarter-end backlog totaled 1,544 units, down 39% year over year. The value of the backlog also decreased 42% year over year to $629.5 million.
Home closing gross margin contracted 200 basis points (bps) to 23.2%. This decline was driven by increased lot costs, higher use of financing incentives, and reduced leverage on fixed costs due to lower home closing revenue. However, the impact was partially offset by lower direct costs per square foot and faster construction cycle times.
Selling, general and administrative expenses — as a percentage of home closing revenues — grew 10 bps from the prior-year quarter to 10.8% owing to a tougher selling environment and commission rates.
Financial Services: The segment’s revenues rose 17% from the prior-year quarter’s level to $8.4 million.
MTH’s 2024 Highlights
For the full year, the company generated $6.4 billion in total revenues (up 4.2% year over year), with EPS rising to $21.44, an increase of 8% compared to 2023. Homes delivered were up 12% to 15,611. The ASPs of the homes delivered were $406,000, down 6% from a year ago. Gross margins were 24.9% (up 10 bps).
Meritage Homes’ Financial Position
At the end of 2024, cash and cash equivalents totaled $651.6 million, down from $921.2 million reported on Dec. 31, 2023. As of Dec. 31, 2024, approximately 65,600 lots were owned or controlled by the company (this includes 5,500 from the Elliott acquisition) compared with about 64,300 lots a year ago.
Total debt to capital was 20.6% compared with 17.9% in 2023-end. Net debt to capital was 11.7% compared with 1.9% on Dec. 31, 2023.
For 2024, net cash used by operating activities was $227.6 million against $355.6 million of net cash provided by operating activities a year ago.
During 2024, Meritage Homes paid quarterly cash dividends, totaling $108.6 million to its shareholders. It brought back 732,255 shares for $125.9 million. As of Dec. 31, 2024, $309.1 million in shares remained under the authorized share repurchase program.
MTH’s 2025 Guidance
The company expects to close between 16,250 and 16,750 homes, which would represent a modest increase from the 15,611 closed in 2024.
Revenue is projected to be between $6.6 billion and $6.9 billion, reflecting continued demand for affordable housing. However, maintaining margins will be critical as financing incentives remain a key tool for driving sales.
MTH Zacks Rank & Peer Releases
Meritage Homes currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
D.R. Horton, Inc. DHI reported first-quarter fiscal 2025 (ended Dec. 31, 2024) results, with earnings and revenues beating Zacks Consensus Estimate but decreasing on a year-over-year basis. Despite rising home inventories, the supply of affordable homes remains constrained, while favorable demographics continue to drive housing demand.
To address affordability challenges and stimulate sales, D.R. Horton leveraged incentives such as mortgage rate buydowns. Additionally, D.R. Horton focused on offering smaller, affordable floor plans to align with the needs of cost-conscious homebuyers. DHI expects consolidated 2024 revenues to be in the range of $36-$37.5 billion compared with $36.8 billion in fiscal 2023. Homes closed are anticipated to be within 90,000-92,000 units.
KB Home KBH posted impressive fiscal fourth-quarter 2024 results, wherein both revenues and earnings surpassed expectations. On a year-over-year basis, both metrics increased, highlighting its resilience in a fluctuating housing market.
KBH’s results underscore the effectiveness of its strategy, which is driven by faster build times and a strong appetite for homeownership despite mortgage rate pressures. However, challenges such as mortgage rate headwinds and potential regulatory shifts could temper the pace of growth. While challenges remain, its strong order book and expanded community count suggest a solid growth trajectory for 2025.
NVR, Inc. NVR reported impressive fourth-quarter 2024 results, with earnings and Homebuilding revenues surpassing the Zacks Consensus Estimate. Both metrics increased on a year-over-year basis.
NVR’s quarterly performance showed strong growth in settlements. Although new orders decreased in the quarter, the average selling price increased.
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