Financial Performance - Home closing revenue decreased by 5% to $1616 million in 2Q25 compared to $1694 million in 2Q24[29] - Home closing gross profit decreased by 22% to $341 million in 2Q25 compared to $440 million in 2Q24[29] - Home closing gross margin decreased by 480 bps to 211% in 2Q25 compared to 259% in 2Q24[29] - Diluted EPS decreased by 35% to $204 in 2Q25 compared to $315 in 2Q24[29] Sales and Community - Net sales orders increased by 3% year-over-year[15] - The company achieved a 2Q25 average absorption pace of 43[20] - Ending community count at June 30 2025 was 312 the highest in company history[20] Land and Inventory - Total lots controlled were 81912[36] - The company reduced land spend to $509 million[42] - 2Q25 specs per community translates to 5 months supply in line with the company's 4-6 months target[27] Capital Allocation - The company returned $76 million of cash to shareholders in 2Q25[35] - Land spend accounted for 87% of the $585 million total capital allocation spend[34]

Core Viewpoint - Meritage Homes reported Q2 2025 earnings that exceeded analyst expectations, but both revenue and net earnings declined significantly year-over-year, indicating challenges in the housing sector despite operational progress [1][8]. Financial Performance - GAAP earnings per share (EPS) for Q2 2025 were $2.04, surpassing estimates of $1.97, but down 35.2% from $3.15 in Q2 2024 [2][8]. - Revenue reached $1.62 billion, exceeding the estimate of $1.58 billion, but decreased by 4.6% from $1.694 billion in the same quarter last year [2][8]. - Net earnings fell to $147 million, a 36.5% decline from $232 million in Q2 2024 [2][8]. - Home closing gross margin decreased to 21.1%, down from 25.9% in Q2 2024, reflecting increased costs and financing incentives [2][7]. Operational Highlights - The company delivered 4,170 homes in Q2 2025, a 1% increase from the previous year, but total revenue from closings dropped by 4% due to a 6% decline in average sales price (ASP) to $387,000 [5][6]. - New orders increased by 3% in units, but order value decreased by 2%, with ASP on orders falling by 5% [6]. - The number of homes in backlog fell by 36% to 1,748 units, with total backlog value down 37% to $695 million [6]. Business Strategy - Meritage Homes focuses on affordable, energy-efficient homes, utilizing a speculative building strategy to reduce sale-to-close times [3][4]. - Recent priorities include expanding community footprint, maintaining a robust land pipeline, and streamlining construction processes [4][10]. - The company aims to control costs and cycle times while responding to volatile mortgage rates and shifting consumer sentiment [4][14]. Market Position and Community Development - As of Q2 2025, Meritage operated 312 active communities, a 9% increase from the previous year, and controlled approximately 81,900 lots for future development [10]. - Land acquisition and development spending was reduced to $509 million, with a revised full-year target of $2.0 billion [10]. Liquidity and Capital Returns - The company maintained strong liquidity with $930 million in cash, supported by a $492 million senior note issuance [12]. - Capital returns to shareholders totaled $76 million, including $45 million in share repurchases and $31 million in dividends, with a 15% increase in quarterly dividends to $0.43 per share [12][17]. Future Outlook - Management reiterated its full-year 2025 outlook, focusing on community count growth and liquidity to support performance [16]. - Key areas of focus for investors include sustaining sales, growing the order book, and monitoring margin trends amid incentive spending [17].

分组1 - Meritage Homes reported quarterly earnings of $2.04 per share, exceeding the Zacks Consensus Estimate of $1.99 per share, but down from $3.15 per share a year ago, representing an earnings surprise of +2.51% [1] - The company achieved revenues of $1.62 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 2.10%, although this is a decrease from year-ago revenues of $1.69 billion [2] - Over the last four quarters, Meritage has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] 分组2 - The stock has underperformed the market, losing about 2% since the beginning of the year compared to the S&P 500's gain of 7.3% [3] - The current consensus EPS estimate for the coming quarter is $2.13 on revenues of $1.71 billion, and for the current fiscal year, it is $8.17 on revenues of $6.58 billion [7] - The Zacks Industry Rank for Building Products - Home Builders is currently in the bottom 21% of over 250 Zacks industries, indicating potential challenges for stock performance [8]

[Financial Highlights](index=1&type=section&id=Summary%20Operating%20Results) Meritage Homes reported its second quarter 2025 results, showing a mixed performance, with home orders and closings seeing slight unit increases, while revenue and profitability declined year-over-year, as home closing revenue fell 5% to $1.62 billion and net earnings dropped 37% to $146.9 million, resulting in a diluted EPS of $2.04, down 35% from the prior year Q2 2025 Key Financial Metrics (YoY) | | Three Months Ended June 30, | | | | :--- | :--- | :--- | :--- | | | **2025** | **2024** | **% Chg** | | Homes closed (units) | 4,170 | 4,118 | 1% | | Home closing revenue (in thousands) | $1,615,709 | $1,693,738 | (5)% | | Home orders (units) | 3,914 | 3,799 | 3% | | Net earnings (in thousands) | $146,879 | $231,555 | (37)% | | Diluted EPS | $2.04 | $3.15 | (35)% | [Management Commentary](index=2&type=section&id=MANAGEMENT%20COMMENTS) Management highlighted a solid performance despite challenging market conditions, attributing it to their go-to-market strategy of move-in ready inventory, emphasizing strong operational execution with a 208% backlog conversion rate, strategically reducing land spend, increasing cash returns to shareholders through dividends and buybacks, and maintaining a strong liquidity position with $930 million in cash and a net debt-to-capital ratio of 14.6% - The company's strategy focuses on move-in ready inventory to remain competitive and grow market share amid high mortgage rates and weak consumer confidence[6](index=6&type=chunk) - Capital allocation strategy has been adjusted, with the full-year land acquisition and development spend target reduced from **$2.5 billion** to approximately **$2.0 billion**[6](index=6&type=chunk) - The company increased its return of cash to shareholders, spending **$76 million** in Q2 2025 on dividends and share repurchases, which tripled the quarterly buyback commitment[6](index=6&type=chunk) - The company maintained a strong liquidity position with **$930 million** in cash and a net debt-to-capital ratio of **14.6%** as of June 30, 2025[6](index=6&type=chunk) [Operating and Financial Review](index=2&type=section&id=Operating%20and%20Financial%20Review) The financial review details performance for the second quarter and first half of 2025, highlighting pressure on revenue and gross margins due to increased financing incentives and higher costs, significant year-over-year declines in net earnings and EPS for both periods, and a strong balance sheet with increased cash reserves, a higher lot count, and active capital return programs [Second Quarter 2025 Results](index=2&type=section&id=SECOND%20QUARTER%20RESULTS) In Q2 2025, home orders increased 3% YoY to 3,914 units, driven by a 7% increase in community count, but home closing revenue fell 5% to $1.6 billion due to a 6% decrease in Average Sales Price (ASP) to $387,000, largely from higher financing incentives, while home closing gross margin compressed by 480 bps to 21.1%, impacted by incentives, higher lot costs, and land deal termination charges, consequently decreasing net earnings by 37% to $147 million Q2 2025 Performance vs. Q2 2024 | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Home Orders (units) | 3,914 | 3,799 | +3% | | Home Closing Revenue (in billions) | $1.6 | $1.7 | -5% | | ASP on Closings | $387,000 | $411,000 | -6% | | Home Closing Gross Margin | 21.1% | 25.9% | -480 bps | | Adjusted Gross Margin* | 21.4% | 26.0% | -460 bps | | Net Earnings (in millions) | $147 | $232 | -37% | | Diluted EPS | $2.04 | $3.15 | -35% | - SG&A expenses as a percentage of home closing revenue rose to **10.2%** from **9.3%** in Q2 2024, driven by higher commissions, start-up costs, and increased spec inventory maintenance[9](index=9&type=chunk) [Year-to-Date 2025 Results](index=3&type=section&id=YEAR%20TO%20DATE%20RESULTS) For the first six months of 2025, total sales orders were flat year-over-year at 7,790 units, home closing revenue decreased 6% to $3.0 billion, driven by a 6% drop in ASP, and home closing gross margin fell 440 bps to 21.5% due to incentives and higher costs, resulting in net earnings declining 35% to $270 million, with diluted EPS at $3.73 H1 2025 Performance vs. H1 2024 | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Home Orders (units) | 7,790 | 7,790 | 0% | | Home Closing Revenue (in billions) | $3.0 | $3.2 | -6% | | Home Closing Gross Margin | 21.5% | 25.9% | -440 bps | | Net Earnings (in millions) | $270 | $418 | -35% | | Diluted EPS | $3.73 | $5.68 | -34% | - The effective income tax rate for the first half of 2025 increased to **23.6%** from **21.4%** in 2024, as fewer homes qualified for energy tax credits under the Inflation Reduction Act[9](index=9&type=chunk) [Balance Sheet & Liquidity](index=4&type=section&id=BALANCE%20SHEET%20%26%20LIQUIDITY) As of June 30, 2025, the company's balance sheet showed strong liquidity with cash and equivalents at $930 million, up from $652 million at year-end 2024, boosted by a senior notes issuance, while land acquisition and development spend was reduced to $509 million in Q2, and the company increased its lot inventory to approximately 81,900 lots, with debt-to-capital and net debt-to-capital ratios of 25.8% and 14.6%, respectively, and returned $76 million to shareholders in Q2 through dividends and share repurchases Key Balance Sheet & Liquidity Metrics | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents (in millions) | $930 | $652 | | Total Lots Owned/Controlled | ~81,900 | N/A | | Debt-to-capital | 25.8% | 20.6% | | Net debt-to-capital | 14.6% | 11.7% | - In Q2 2025, the company repurchased **674,124 shares** for **$45 million** and paid **$31 million** in dividends[11](index=11&type=chunk) - Subsequent to Q2 2025, the company refinanced its revolving credit facility, extending its maturity from **2029** to **2030**[11](index=11&type=chunk) [Consolidated Financial Statements](index=6&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements provide a detailed view of the company's financial performance and position, with the Income Statement confirming the decline in revenue and net earnings, the Balance Sheet reflecting an increase in assets, primarily cash and real estate, and a rise in liabilities due to new debt issuance, and the Statement of Cash Flows showing cash generation from financing activities outpaced cash used in operations and investing, leading to a higher cash balance [Consolidated Income Statements](index=6&type=section&id=Consolidated%20Income%20Statements) For Q2 2025, total closing revenue decreased 4% to $1.62 billion, while total cost of closings increased 2%, leading to a 23% drop in total closing gross profit, with net earnings for the quarter at $146.9 million, a 37% decrease from $231.6 million in Q2 2024, and for the six months ended June 30, 2025, net earnings fell 35% to $269.7 million Q2 2025 Income Statement Highlights (in thousands) | | Three Months Ended June 30, | | | :--- | :--- | :--- | | | **2025** | **2024** | | Total closing revenue | $1,623,986 | $1,693,738 | | Total closing gross profit | $340,609 | $439,506 | | Earnings before income taxes | $193,060 | $297,361 | | Net earnings | $146,879 | $231,555 | [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were $7.76 billion, an increase from $7.16 billion at the end of 2024, driven by a rise in cash to $930 million and real estate assets to $5.96 billion, while total liabilities increased to $2.49 billion from $2.02 billion, mainly due to an increase in senior notes, and total stockholders' equity grew to $5.27 billion Balance Sheet Highlights (in thousands) | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $930,463 | $651,555 | | Real estate | $5,963,674 | $5,728,775 | | Total assets | $7,756,369 | $7,162,654 | | **Liabilities & Equity** | | | | Senior and convertible senior notes, net | $1,801,609 | $1,306,535 | | Total liabilities | $2,487,195 | $2,021,081 | | Total stockholders' equity | $5,269,174 | $5,141,573 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, the company used $28.9 million in cash from operating activities, primarily due to an increase in real estate inventory, and investing activities used $21.6 million, while financing activities provided $329.4 million in cash, driven by $497.2 million in proceeds from issuing senior notes, which more than offset $90.0 million in share repurchases and $61.5 million in dividend payments, resulting in a net cash increase of $278.9 million Six Months Ended June 30, 2025 Cash Flow (in thousands) | | 2025 | | :--- | :--- | | Net cash used in operating activities | $(28,875) | | Net cash used in investing activities | $(21,610) | | Net cash provided by financing activities | $329,393 | | **Net increase in cash and cash equivalents** | **$278,908** | | Ending cash and cash equivalents | $930,463 | [Segment Operating Data](index=10&type=section&id=Operating%20Data) The company's operations are divided into West, Central, and East regions, with the East region being the strongest performer in Q2 2025, showing year-over-year increases in both homes closed (+15%) and homes ordered (+14%), while the Central region saw a modest 2% increase in orders, and the West region experienced declines in both closings and orders, with the overall ending community count growing 9% YoY to 312, and the Tennessee segment reclassified from East to Central effective January 1, 2025 Q2 2025 Homes Ordered by Region (YoY) | Region | Q2 2025 Homes Ordered | Q2 2024 Homes Ordered | % Change | | :--- | :--- | :--- | :--- | | West | 1,001 | 1,114 | (10)% | | Central | 1,298 | 1,274 | +2% | | East | 1,615 | 1,411 | +14% | | **Total** | **3,914** | **3,799** | **+3%** | Q2 2025 Homes Closed by Region (YoY) | Region | Q2 2025 Homes Closed | Q2 2024 Homes Closed | % Change | | :--- | :--- | :--- | :--- | | West | 1,165 | 1,265 | (8)% | | Central | 1,374 | 1,440 | (5)% | | East | 1,631 | 1,413 | +15% | | **Total** | **4,170** | **4,118** | **+1%** | - Total ending active communities increased **9%** year-over-year, from **287** in Q2 2024 to **312** in Q2 2025[30](index=30&type=chunk) [Supplemental and Non-GAAP Information](index=12&type=section&id=Supplement%20and%20Non-GAAP%20information) This section provides supplemental data, including details on capitalized interest, and reconciles GAAP to non-GAAP financial measures, with the key non-GAAP measure presented being the net debt-to-capital ratio, which stood at 14.6% at the end of Q2 2025, up from 11.7% at the end of 2024, and the company explains that this metric is useful for investors to understand its operating results and for comparison with industry peers Reconciliation of Net Debt-to-Capital | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Debt | $1,827,729 | $1,335,878 | | Less: Cash and cash equivalents | $(930,463) | $(651,555) | | Net Debt | $897,266 | $684,323 | | Stockholders' Equity | $5,269,174 | $5,141,573 | | **Net debt-to-capital** | **14.6%** | **11.7%** | - The company defines net debt-to-capital as net debt (total debt less cash) divided by total net capital (net debt plus stockholders' equity) and considers it a relevant non-GAAP measure for investors[34](index=34&type=chunk) [About Meritage Homes & Forward-Looking Statements](index=13&type=section&id=About%20Meritage%20Homes%20Corporation) Meritage Homes identifies itself as the fifth-largest public homebuilder in the U.S. based on 2024 closings, focusing on energy-efficient entry-level and first move-up homes, with a 40-year history and operations in 12 states, and the press release includes a standard forward-looking statements disclaimer, highlighting numerous risks such as interest rate changes, material costs, competition, and other market uncertainties that could affect future results - Meritage is the **fifth-largest** public homebuilder in the United States, based on homes closed in **2024**, and specializes in energy-efficient homes[35](index=35&type=chunk) - The company cautions that forward-looking statements are subject to significant risks and uncertainties, including interest rates, material costs, cancellation rates, and supply chain constraints[38](index=38&type=chunk)

Core Viewpoint - Meritage Homes reported a solid performance in Q2 2025 despite challenging market conditions, with a focus on increasing market share through a strategy of move-in ready inventory [3][4]. Financial Performance - Home closing revenue for Q2 2025 was $1.6 billion, a decrease of 5% from Q2 2024, primarily due to a 6% drop in average sales price (ASP) to $387,000, although home closing volume increased by 1% to 4,170 units [7][11]. - Net earnings for Q2 2025 were $146.9 million, down 37% from $231.6 million in Q2 2024, resulting in diluted EPS of $2.04, a 35% decrease year-over-year [7][14]. - For the first six months of 2025, home closing revenue decreased by 6% to $3.0 billion, with net earnings of $270 million, reflecting a 35% decline from the same period in 2024 [7][14]. Operational Highlights - The company sold 3,914 homes in Q2 2025, a 3% increase year-over-year, supported by a 7% increase in average community count [4][12]. - The ending backlog of homes decreased by 36% to 1,748 units, with a backlog value of $695.5 million, down 37% from the previous year [7][20]. Cost and Margin Analysis - Home closing gross margin for Q2 2025 was 21.1%, down from 25.9% in Q2 2024, impacted by higher lot costs and increased utilization of financing incentives [7][12]. - Selling, general and administrative expenses (SG&A) as a percentage of home closing revenue increased to 10.2% in Q2 2025 from 9.3% in Q2 2024, primarily due to higher commissions and maintenance costs [7][12]. Capital Allocation and Liquidity - The company reduced land acquisition and development spending to $509 million in Q2 2025, targeting $2.0 billion for the full year, down from a previous estimate of $2.5 billion [3][12]. - As of June 30, 2025, Meritage had cash and cash equivalents of $930 million, reflecting a strong liquidity position [6][12]. Market Strategy - The management emphasized a go-to-market strategy focusing on move-in ready inventory to remain competitive amid elevated mortgage rates and weakened consumer confidence [3][4]. - The company aims to increase its return of cash to shareholders, with $76 million spent on cash dividends and share repurchases in Q2 2025, tripling its quarterly buyback commitment [3][12].

Core Viewpoint - Momentum investing focuses on "buying high and selling higher" rather than traditional strategies of "buying low and selling high" [1] Group 1: Momentum Investing Strategy - Momentum investors often face challenges in determining the right entry point, as stocks may lose momentum when their valuations exceed future growth potential [2] - A safer approach involves investing in bargain stocks that exhibit recent price momentum, utilizing tools like the Zacks Momentum Style Score to identify such opportunities [3] Group 2: Meritage Homes (MTH) Analysis - Meritage Homes (MTH) has shown a four-week price change of 12.7%, indicating strong investor interest [4] - The stock has gained 3.2% over the past 12 weeks and has a beta of 1.37, suggesting it moves 37% more than the market [5] - MTH has a Momentum Score of B, indicating a favorable time to invest based on momentum [6] - The stock has a Zacks Rank 2 (Buy) due to upward revisions in earnings estimates, which attract more investor interest [7] - MTH is trading at a Price-to-Sales ratio of 0.80, suggesting it is undervalued at 80 cents for each dollar of sales [7] Group 3: Investment Opportunities - MTH is highlighted as a strong candidate for investment, with potential for further price appreciation [8] - There are additional stocks that meet the criteria of the 'Fast-Paced Momentum at a Bargain' screen, providing further investment opportunities [8] - Zacks offers over 45 Premium Screens tailored to different investing styles, aiding in stock selection [9]

Core Insights - Meritage Homes Corporation, the fifth largest public homebuilder in the U.S., will release its second quarter 2025 results on July 23, 2025, after market close [1] - A conference call to discuss the results is scheduled for July 24, 2025, at 8:00 a.m. Pacific Standard Time [1] Company Overview - Meritage Homes is recognized as the fifth-largest public homebuilder in the United States based on homes closed in 2024 [3] - The company specializes in energy-efficient and affordable entry-level and first move-up homes, with operations across multiple states including Arizona, California, Texas, and Florida [3] - Over its 39-year history, Meritage has delivered nearly 200,000 homes and is known for its distinctive style, quality construction, and award-winning customer experience [4] - The company has received numerous awards for its commitment to energy-efficient homebuilding, including the EPA's ENERGY STAR® Partner of the Year for Sustained Excellence Award [4]

Core Viewpoint - Meritage Homes (NYSE: MTH) was initially recommended as a Long Idea in June 2020, and the bullish thesis has been reiterated multiple times since then. Despite a year-to-date decline of approximately 15%, the stock is considered more attractive now [1]. Summary by Relevant Sections - Investment Thesis: The stock of Meritage Homes has seen a decline of about 15% year-to-date, which presents a more attractive investment opportunity according to the company's ongoing bullish outlook [1].

Core Thesis - Meritage Homes (MTH) is positioned to gain market share and deliver homes efficiently while returning capital to shareholders, despite a challenging housing market outlook [1][2] Industry Overview - The U.S. housing market is currently undersupplied by 3.7 million units, contributing to decreased housing affordability [3] - The average sales price of new homes in the U.S. increased from approximately $332,000 in February 2020 to around $404,000 in March 2025 [5] Company Performance - Meritage Homes has increased its market share of U.S. new one-family homes from 1.3% in 2017 to 2.3% in the TTM [6] - The company recorded its second-highest first-quarter orders and closings in 1Q25, with 61% of homes closed sold within the same quarter, up from 48% the previous year [8][10] - Revenue and net operating profit after-tax (NOPAT) grew by 11% and 17% respectively from 2014 through TTM ending 1Q25, with NOPAT margin improving from 7% in 2014 to 11% in TTM [12] Financial Metrics - Meritage Homes generated $1.1 billion in free cash flow (FCF) from 2019 through 1Q25, representing 26% of enterprise value [18] - The company has returned $665 million to shareholders during the same period, including $179 million in dividends and $486 million in share repurchases [18][15] - The current dividend yield is 2.5%, with potential for a combined yield of 4.8% when factoring in share repurchases [14][16] Challenges - High mortgage rates have risen significantly, with the average 30-year fixed-rate mortgage at 6.8% in May 2025, making home purchases more expensive [19] - Meritage Homes' average selling price on home closings fell by 6% year-over-year in 1Q25, attributed to increased financial incentives [23] - The company's NOPAT margin decreased from 12% in 1Q24 to 8.6% in 1Q25 due to these pressures [23] Valuation Insights - At a current price of $67 per share, the market implies a permanent 30% decline in profits, despite historical growth rates of 21% compounded annually over the last five years [24] - If the company maintains historical growth rates, the stock could see a potential upside of over 40%, with a target price of $97 per share [26]

Company Overview - Meritage Homes Corporation (MTH) is currently experiencing significant attention in the options market, particularly with the Jun 20, 2025 $50.00 Call option showing high implied volatility, indicating expectations of a substantial price movement [1] Analyst Sentiment - Meritage Homes holds a Zacks Rank of 4 (Sell) within the Building Products- Home Builders industry, which is positioned in the bottom 6% of the Zacks Industry Rank [3] - Over the past 60 days, no analysts have raised their earnings estimates for the current quarter, while ten analysts have lowered their estimates, resulting in a decrease of the Zacks Consensus Estimate from $2.41 per share to $1.99 [3] Options Market Dynamics - The high implied volatility surrounding Meritage Homes suggests that options traders anticipate a significant price movement, which could indicate an upcoming event that may lead to either a rally or a sell-off [2][4] - Seasoned options traders often seek to sell premium on options with high implied volatility, aiming to benefit from the decay of the option's value if the underlying stock does not move as much as expected by expiration [4]