Financial Performance - Home closing revenue for Q1 2025 was $1.3 billion, a decrease of 8.5% year-over-year, with home closing units down 2.6% to 3,416 homes [109]. - The average sales price (ASP) for home closings decreased by 6.0% to $392.9 thousand, attributed to increased utilization of incentives [109]. - Home orders totaled 3,876 for Q1 2025, down 2.9% from the prior year, with a 10.2% decrease in orders pace [110]. - Home closing gross margin declined by 380 basis points to 22.0% in Q1 2025, compared to 25.8% in the prior year, due to lower revenue and higher lot costs [109]. - Earnings before income taxes for Q1 2025 were $160.2 million, a decrease of $73.9 million from $234.0 million in Q1 2024 [109]. - The company generated net earnings of $122.8 million during the three months ended March 31, 2025, down from $186.0 million in the same period of 2024 [143]. Backlog and Cancellations - The cancellation rate remained stable at 9% in Q1 2025, compared to 8% in Q1 2024, which is below the company's historical average [110]. - The backlog at the end of Q1 2025 was valued at $812.4 million, a decrease of 34.7% year-over-year, with 2,004 homes in backlog, down 33.9% [116]. - The cancellation rate for Q1 2025 was 9%, slightly up from 8% in Q1 2024, but below the historical average, indicating improved order-to-closing timelines [118][119]. - The backlog at the end of Q1 2025 was 2,004 homes valued at $812.4 million, down from 3,033 homes valued at $1.2 billion in Q1 2024, reflecting a higher backlog conversion rate [119]. Regional Performance - The West Region reported home closing revenue of $479.6 million in Q1 2025, a 7.0% decrease from $515.6 million in the prior year, with a cancellation rate improvement from 9% to 7% [120]. - The Central Region's home closing revenue decreased by 14.7% to $412.5 million in Q1 2025, with a closing volume drop of 8.3% to 1,187 homes [121]. - The East Region saw a 2.8% increase in home closings to 1,231 homes, but revenue decreased by 3.6% to $449.9 million due to a 6.2% lower ASP [122]. Debt and Liquidity - The company ended Q1 2025 with a debt-to-capital ratio of 26.1% and a net debt-to-capital ratio of 13.7% after issuing $500 million in senior notes [114]. - The company's debt-to-capital ratio increased to 26.1% as of March 31, 2025, compared to 20.6% at the end of 2024 [146]. - The net debt-to-capital ratio as of March 31, 2025, was 13.7%, up from 11.7% at the end of 2024 [147]. - The company has no material debt maturities until 2027, indicating a stable short-term liquidity position [139]. - The company had $1.0 billion in cash and cash equivalents and $770.6 million available under its Credit Facility as of March 31, 2025, totaling approximately $1.8 billion in available capacity [135]. Strategic Initiatives - The company aims to maintain a top 5 market position in all markets and expand community count through strategic initiatives [112]. - Total active communities increased to 290 in Q1 2025 from 275 in Q1 2024, with an average of 291.0 compared to 272.5 [117]. - The company purchased approximately 2,900 lots for $222.1 million and started construction on 3,601 homes during Q1 2025 [111]. Cash Flow and Dividends - As of March 31, 2025, the company reported net cash used in operating activities of $42.6 million, a decrease from net cash provided of $81.9 million for the same period in 2024 [143]. - Net cash provided by financing activities totaled $414.1 million for the three months ended March 31, 2025, primarily due to proceeds from the issuance of 5.650% Senior Notes due 2035 [145]. - The company paid a quarterly cash dividend of $0.43 per share for the three months ended March 31, 2025, compared to $0.375 per share in the same period of 2024 [148]. Seasonal Variations - The company experienced seasonal variations in operating results, typically taking more orders in the first half of the year, which may affect working capital requirements [151].

Financial Data and Key Metrics Changes - Meritage Homes reported home closing revenues of $1.3 billion, an 8% year-over-year decrease due to declines in both home closing volume and a lower average selling price (ASP) of $393,000 [31][40] - The company achieved a diluted EPS of $1.69, down 33% from $2.53 in the prior year [40] - Home closing gross margin was 22%, down 380 basis points from 25.8% in the first quarter of 2024 [33][40] Business Line Data and Key Metrics Changes - The company sold almost 3,900 homes in Q1 2025, with 3,416 deliveries generating home closing revenues of $1.3 billion [9][31] - The average absorption pace decreased from 4.9% per month in the prior year to 4.4% in Q1 2025, partially offset by a 7% increase in average community count [16] - The cancellation rate remained low at 9%, attributed to the 60-day closing ready commitment [16] Market Data and Key Metrics Changes - The central region, now including Nashville, had the highest average absorption pace of 5.3% net sales per quarter [22] - The west region experienced an average absorption pace of 4.1%, with Colorado and Utah being more challenging markets [23] - The east region had an average absorption pace of 4, down from 4.6% last year, impacted by divisions in Huntsville and the Gulf Coast [24] Company Strategy and Development Direction - The company focuses on a 60-day closing ready commitment and move-in inventory to provide certainty to customers in a volatile market [11][52] - Meritage Homes anticipates a double-digit year-over-year increase in community count by the end of 2025, aiming for 20,000 units by 2027 [20] - The strategy includes balancing sales pace and price while optimizing returns and land positions [14][15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased uncertainty in the macroeconomic environment, leading to some softening in the housing market [11] - Despite challenges, favorable demographic trends and limited supply of affordable homes are expected to capture a large portion of total homebuyer demand [11] - The company maintains its full-year 2025 guidance of home closings between 16,250 to 16,750 units, with home closing revenue of $6.6 billion to $6.9 billion [50] Other Important Information - The company ended Q1 2025 with $1 billion in cash, reflecting a new $500 million debt issuance priced at 5.65% [43] - Meritage Homes completed a two-for-one stock split on January 2, 2025, and increased its quarterly cash dividend by 15% year-over-year [44] - The company controlled approximately 84,200 lots as of March 31, 2025, equating to a 5.4-year supply based on the last 12-month closings [49] Q&A Session Summary Question: Guidance on pricing power and expectations - Management indicated that the ending backlog is at $405,000, suggesting a function of mix rather than pricing power [56] Question: Expectations for incentive levels moving forward - Management expressed confidence in Q2, noting that new communities opening in strong markets would drive demand [61] Question: Timing of new community openings - Management stated that most growth will come in the second half of the year, with new communities opening with move-in-ready inventory [70] Question: Bulk sales to investors - Management noted that traditionally around 5% of sales are to investor communities, with no recent increase in that amount [73] Question: Ability to maintain targeted sales pace - Management expressed confidence in maintaining guidance based on Q1 performance and positive trends in April [80] Question: M&A backdrop and deal flow - Management noted high deal flow and opportunities for acquisitions, particularly in strong markets like Nashville [86] Question: Competitive advantage of the 60-day moving guarantee - Management highlighted the strong realtor partnerships and the appeal of move-in-ready homes as competitive advantages [95] Question: Direct cost savings and tariff impacts - Management indicated that while labor is performing well, the impact of potential tariffs remains uncertain [104]

Financial Data and Key Metrics Changes - Meritage Homes reported home closing revenues of $1.3 billion, an 8% year-over-year decrease due to declines in both home closing volume and a lower average selling price (ASP) of $393,000 [31][40] - The company achieved a diluted EPS of $1.69, down 33% from $2.53 in the prior year [40] - Home closing gross margin was 22%, down 380 basis points from 25.8% in the first quarter of 2024 [33][40] Business Line Data and Key Metrics Changes - The company sold almost 3,900 homes in Q1 2025, with 3,416 deliveries generating home closing revenues of $1.3 billion [9][31] - The average absorption pace decreased from 4.9% per month in the prior year to 4.4% in Q1 2025, while the cancellation rate remained lower than historical averages at 9% [16][31] - The ending community count was 290, up 8% year-over-year, with 30 new communities coming online during the quarter [17][21] Market Data and Key Metrics Changes - The central region had the highest average absorption pace of 5.3% net sales per quarter, while the west region had an average absorption pace of 4.1% [22][23] - The east region's average absorption pace was 4 net sales per month, down from 4.6% last year, impacted by divisions not yet fully operational [24] - The company anticipates a double-digit year-over-year increase in community count by the end of 2025 [20] Company Strategy and Development Direction - The company focuses on a 60-day closing ready commitment and move-in inventory to provide certainty to customers in a volatile market [11][12] - Meritage Homes aims to achieve 20,000 units by 2027, with a disciplined land acquisition strategy based on local market dynamics [20][49] - The company plans to maintain its capital allocation strategy while being mindful of economic uncertainties [45] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased uncertainty in the macroeconomic environment but noted favorable demographic trends and limited supply of affordable homes [11][12] - The first few weeks of Q2 2025 felt consistent with March, with healthy interest in affordable, move-in-ready homes [21] - Management expressed confidence in maintaining guidance for home closings and revenue despite market challenges [50] Other Important Information - The company completed a two-for-one stock split on January 2, 2025, and increased its quarterly cash dividend by 15% year-over-year [44][45] - Meritage Homes ended Q1 2025 with $1 billion in cash, reflecting a new $500 million debt issuance [42][43] Q&A Session Summary Question: Guidance and Pricing Power - An analyst inquired about the guidance and pricing power, noting the expected average closing price and the lack of clear pricing power indications [55] - Management responded that the ending backlog was at $405,000, indicating a mix effect rather than pure pricing power [56] Question: Incentive Levels and Market Conditions - Another analyst asked about expectations for incentive levels as the market conditions evolve [58] - Management indicated that they are comfortable with current incentive thresholds and have achieved targeted sales volumes [63] Question: Community Openings and Sales Pace - An analyst questioned the timing of new community openings and their impact on sales pace [66] - Management confirmed that most growth will come in the second half of the year, with new communities expected to drive higher absorption rates [70] Question: Bulk Sales to Investors - An analyst asked about the percentage of sales to bulk investors and future expectations [71] - Management noted that traditionally around 5% of sales are to investor communities, with no recent increase [74] Question: M&A Landscape and Deal Flow - An analyst inquired about the M&A backdrop and deal flow in the current market [85] - Management stated that deal flow is high, with opportunities to renegotiate terms and potential price concessions [89] Question: Competitive Advantage and Realtor Engagement - An analyst asked about the competitive advantage of the 60-day move-in guarantee and realtor engagement [93] - Management highlighted a 92% co-broke rate and emphasized the importance of move-in-ready inventory as a competitive advantage [96] Question: Direct Cost Savings and Tariff Risks - An analyst questioned the potential for direct cost savings and the impact of tariffs on the supply chain [102] - Management expressed confidence in navigating cost environments and maintaining production pace despite potential tariff impacts [106]

Core Viewpoint - Meritage Homes Corporation (MTH) reported mixed first-quarter 2025 results, with earnings missing estimates while total closing revenues exceeded expectations for the tenth consecutive quarter [1][3]. Company Performance - MTH sold nearly 3,900 homes in Q1 2025, despite challenges in the housing market, attributed to favorable demographics and a shortage of affordable homes [2]. - Earnings per share (EPS) was $1.69, missing the Zacks Consensus Estimate of $1.71, and down 33% from $2.53 in the prior year [3]. - Total revenues amounted to $1.36 billion, an 8% decline from $1.47 billion year-over-year [3]. Revenue Breakdown - Total Closing Revenues were $1.36 billion, down 8% from the previous year but exceeding the consensus estimate of $1.33 billion by 1.5% [4]. - Home closing revenues were $1.34 billion, also down 8% year-over-year, while land closing revenues surged 569% to $15.4 million [4]. Home Sales and Orders - Home closings totaled 3,416 units, a 3% decrease from the prior year, with an average selling price (ASP) of $402,000, down 2% [5]. - Total home orders fell 3% to 3,876 homes, with a dollar value decrease of 4% to $1.56 billion [6]. - The backlog at quarter-end was 2,004 units, down 34% year-over-year, with a value decrease of 35% to $812.4 million [6]. Margin and Expenses - Home closing gross margin contracted by 380 basis points to 22%, primarily due to financing incentives and rising lot costs [7]. - Selling, general and administrative expenses as a percentage of home closing revenues increased by 90 basis points to 11.3% [8]. Financial Position - As of March 31, 2025, cash and cash equivalents were $1.01 billion, up from $651.6 million at the end of 2024 [9]. - Total debt to capital ratio increased to 26.1% from 20.6% at the end of 2024 [10]. - Net cash used by operating activities was $42.6 million, compared to $81.9 million provided in the previous year [10]. Shareholder Returns and Guidance - MTH paid $31 million in dividends and repurchased 605,316 shares for $45 million during the quarter [11]. - The company expects to close between 16,250 and 16,750 homes in 2025, projecting revenues between $6.6 billion and $6.9 billion [12].

Core Viewpoint - Meritage Homes reported a decline in revenue and earnings for the quarter ended March 2025, with revenue at $1.36 billion, down 7.6% year-over-year, and EPS at $1.69, compared to $2.53 in the same quarter last year, indicating a mixed performance against analyst expectations [1]. Financial Performance - Revenue for the quarter was $1.36 billion, which was a surprise of +1.53% over the Zacks Consensus Estimate of $1.34 billion [1]. - EPS came in at $1.69, which was -1.17% below the consensus estimate of $1.71 [1]. - Total closing revenue from homebuilding was $1.36 billion, representing a year-over-year decline of -7.6% [4]. Key Metrics - Order Backlog: 2,004 homes, below the average estimate of 2,398 homes [4]. - Homes Closed: 3,416 homes, slightly above the average estimate of 3,368 homes [4]. - Homes Ordered: 3,876 homes, below the average estimate of 4,222 homes [4]. - Order Backlog Value: $812.36 million, significantly lower than the average estimate of $975.98 million [4]. - Active Communities: 290, below the average estimate of 300 [4]. - Homes Ordered Value: $1.56 billion, below the average estimate of $1.68 billion [4]. - Revenue from Land Closing: $15.42 million, significantly above the average estimate of $4.27 million, showing a year-over-year increase of +569% [4]. - Revenue from Financial Services: $7.08 million, above the average estimate of $6.42 million, with a year-over-year increase of +11.5% [4]. Stock Performance - Shares of Meritage have returned -6.5% over the past month, slightly outperforming the Zacks S&P 500 composite's -6.6% change [3]. - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3].

Financial Performance - Meritage Homes closed 3,416 homes in Q1 2025, a decrease of 3% from 3,507 homes in Q1 2024, with home closing revenue of $1.34 billion, down 8% year-over-year[4] - Net earnings for Q1 2025 were $122.81 million, a 34% decrease from $186.02 million in Q1 2024, resulting in diluted EPS of $1.69, down 33% year-over-year[4] - Total homes closed in Q1 2025 were 3,416, generating revenue of $1.34 billion, down from 3,507 homes and $1.47 billion in Q1 2024, representing a 2.6% decrease in homes closed and a 8.5% decrease in revenue[23] - Net earnings for Q1 2025 were $122.8 million, a decrease of 34% compared to $186.0 million in Q1 2024[21] Sales and Orders - The average sales price for home closings was $393,000, a 6% decrease from $418,000 in the previous year, while home order value decreased by 4% to $1.56 billion[4] - Homes ordered in Q1 2025 totaled 3,876 with a value of $1.56 billion, compared to 3,991 homes valued at $1.63 billion in Q1 2024, indicating a 2.9% decrease in orders[23] - The order backlog as of March 31, 2025, was 2,004 homes valued at $812.4 million, down from 3,033 homes valued at $1.24 billion in the same period last year, reflecting a 33.9% decrease in backlog value[23] Operational Metrics - Ending backlog units fell by 34% to 2,004 units, with a backlog value of $812.36 million, down 35% from the previous year[4] - The company achieved a home closing gross margin of 22.0%, a decrease of 380 basis points from 25.8% in the prior year, attributed to increased financing incentives and higher lot costs[8] - Selling, general and administrative expenses as a percentage of home closing revenue increased to 11.3% in Q1 2025 from 10.4% in Q1 2024, due to higher technology and start-up costs[10] - Active communities increased to 290 in Q1 2025 from 275 in Q1 2024, showing a growth of 5.5%[23] Debt and Cash Management - Meritage Homes issued $500 million in new debt during the quarter, maintaining a net debt-to-capital ratio of 13.7%[7] - The debt-to-capital ratio increased to 26.1% in Q1 2025 from 20.6% in Q1 2024, indicating a rise in leverage[28] - The company reported cash and cash equivalents of $1 billion as of March 31, 2025, compared to $652 million at the end of 2024[10] - The company reported a net cash used in operating activities of $42.6 million in Q1 2025, a significant decline from $81.9 million provided in Q1 2024[21] - The company issued $497.2 million in senior notes during Q1 2025, contributing to a net cash provided by financing activities of $414.1 million[21] Future Outlook - For full year 2025, Meritage Homes is guiding home closing volume between 16,250 and 16,750 units, with expected revenue of $6.6 to $6.9 billion[12] - Meritage Homes Corporation is focused on expanding its market share and anticipates growth in home closing volume and revenue for the full year 2025[31] - The company added nearly 2,200 net new lots in Q1 2025, bringing total lots owned or controlled to approximately 84,200[10]

Core Insights - Meritage Homes reported a healthy start to 2025, closing 3,416 homes in Q1, despite a 3% decrease from the previous year [3][4] - The company achieved a home closing revenue of $1.34 billion, reflecting an 8% year-over-year decline, attributed to lower home closing volume and average sales price [4][11] - The ending backlog of homes decreased significantly by 34% to 2,004 units, with a backlog value of $812 million, down 35% from the previous year [4][11] Financial Performance - Net earnings for Q1 2025 were $122.8 million, a 34% decrease from $186 million in Q1 2024, primarily due to lower home closing revenue and gross margins [4][11] - Diluted earnings per share (EPS) fell to $1.69, down 33% from $2.53 in the same quarter last year [4][11] - The home closing gross margin was reported at 22.0%, a decrease of 380 basis points from 25.8% in the prior year [7][11] Operational Highlights - The average sales price for homes closed was $393,000, down 6% from $418,000 in Q1 2024, influenced by increased financing incentives [4][11] - Home orders totaled 3,876 units, a 3% decrease year-over-year, with an average sales price of $402,000, down 2% from the previous year [4][11] - The company maintained a strong balance sheet with cash and cash equivalents totaling $1 billion as of March 31, 2025, compared to $652 million at the end of 2024 [3][4] Strategic Initiatives - Meritage Homes issued $500 million in new debt to balance growth investments and shareholder returns, with land acquisition and development spending reaching $465 million in Q1 2025 [3][4] - The company reported a backlog conversion rate of 221%, indicating strong demand and effective sales strategies [3][4] - Management emphasized a focus on affordability and move-in ready inventory to capture additional market share amid favorable demographics and limited supply [3][4]

Core Viewpoint - Analysts project that Meritage Homes (MTH) will report quarterly earnings of $1.71 per share, reflecting a year-over-year decline of 32.4%, with revenues expected to reach $1.35 billion, down 8.4% from the same quarter last year [1]. Earnings Estimates - Over the past 30 days, the consensus EPS estimate has been adjusted downward by 0.5%, indicating a reassessment by covering analysts [2]. - Changes in earnings estimates are crucial for predicting investor reactions, as empirical research shows a strong correlation between earnings estimate revisions and short-term stock performance [3]. Revenue Projections - Analysts estimate total closing revenue for homebuilding at $1.35 billion, representing an 8% decline from the prior-year quarter [5]. - Home closing revenue is also projected at $1.35 billion, indicating an 8.1% decrease from the same quarter last year [5]. - Financial services revenue is expected to reach $6.42 million, showing a 1% increase from the year-ago quarter [5]. Home Orders and Backlog - Total homes ordered are projected to be 4,222, up from 3,991 reported in the same quarter last year [6]. - Average sales price for home closing revenue is expected to be $399.89, down from $418 in the previous year [6]. - Order backlog is estimated at 2,398, compared to 3,033 reported in the same quarter last year [6]. Homes Closed and Backlog Value - The consensus estimate for total homes closed is 3,368, down from 3,507 in the previous year [7]. - Order backlog average sales price is projected at $404.29, compared to $410 in the same quarter last year [7]. - Order backlog value is expected to reach $975.98 million, down from $1.24 billion in the previous year [7]. Active Communities and Home Orders Value - Analysts estimate that active communities will total 300, compared to 275 in the previous year [8]. - Homes ordered value is projected to be $1.68 billion, slightly up from $1.63 billion in the previous year [8]. Average Sales Price - Home orders average sales price is expected to be $399.08, down from $409 in the same quarter last year [9]. Stock Performance - Over the past month, Meritage shares have declined by 7.5%, compared to a 5.6% decline in the Zacks S&P 500 composite [10].

Core Viewpoint - Wall Street anticipates a year-over-year decline in earnings and revenues for Meritage Homes in the upcoming earnings report, with actual results being crucial for stock price movement [1][3]. Earnings Expectations - The consensus estimate for Meritage's quarterly earnings is $1.74 per share, reflecting a year-over-year decrease of 31.2% [3]. - Expected revenues are projected at $1.35 billion, down 8.4% from the same quarter last year [3]. Estimate Revisions - The consensus EPS estimate has been revised down by 0.46% over the last 30 days, indicating a bearish sentiment among analysts [4]. - The Most Accurate Estimate for Meritage is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -0.86% [10][11]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive or negative reading indicates the likelihood of actual earnings deviating from consensus estimates, with positive readings being more predictive of earnings beats [6][7]. - A positive Earnings ESP combined with a strong Zacks Rank increases the likelihood of a positive surprise, but Meritage currently holds a Zacks Rank of 3, complicating predictions of an earnings beat [8][11]. Historical Performance - In the last reported quarter, Meritage exceeded earnings expectations significantly, posting earnings of $4.72 per share against an expectation of $2.21, resulting in a surprise of +113.57% [12]. - Over the past four quarters, Meritage has consistently beaten consensus EPS estimates [13]. Conclusion - Despite the potential for an earnings beat, various factors can influence stock movement beyond just earnings results, making it essential to consider other elements before making investment decisions [14][16].

Core Viewpoint - The article emphasizes the investment philosophy focused on identifying mispriced securities through understanding the financial drivers of small cap companies, utilizing DCF model valuation to assess risk-to-reward dynamics [1]. Group 1: Investment Philosophy - The investment strategy is centered on small cap companies across US, Canadian, and European markets [1]. - The approach is flexible, not confined to traditional investment categories such as value, dividend, or growth investing, but rather considers all prospects of a stock [1]. Group 2: Valuation Methodology - A DCF (Discounted Cash Flow) model is highlighted as a key tool for revealing the true value of a company's financials [1]. - The methodology aims to uncover potential investment opportunities by analyzing the underlying financial metrics of companies [1].