Core Viewpoint - Meritage Homes Corporation, the fifth largest public homebuilder in the U.S., is set to release its first quarter 2025 results on April 23, 2025, with a conference call scheduled for April 24, 2025 [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, operating in multiple states including Arizona, California, Colorado, and Texas [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]. Industry Leadership - Meritage Homes is an industry leader in energy-efficient homebuilding, having received multiple awards from the U.S. Environmental Protection Agency (EPA), including the ENERGY STAR® Partner of the Year for Sustained Excellence Award [4].

Core Viewpoint - Meritage Homes Corporation has announced a public offering of $500 million in senior notes with a 5.650% interest rate, maturing in 2035, to be used for general corporate purposes [1][5]. Group 1: Offering Details - The company priced a registered underwritten public offering of $500 million aggregate principal amount of 5.650% Senior Notes due March 15, 2035 [1]. - The senior notes will pay interest semi-annually at a rate of 5.650% per year [1]. - The closing of the offering is expected to occur on March 6, 2025, subject to customary closing conditions [5]. Group 2: Management and Underwriters - J.P. Morgan Securities LLC, BofA Securities, Inc., Goldman Sachs & Co. LLC, and others are acting as Joint Book-Running Managers for the transaction [2]. - TCBI Securities, Inc., Wedbush Securities Inc., and Comerica Securities, Inc. are acting as Joint Co-Managers [2]. Group 3: Regulatory Information - The offering is made pursuant to an effective shelf registration statement filed with the SEC [3]. - Copies of the prospectus supplement and accompanying prospectus can be obtained free of charge from the SEC website or by contacting the underwriters [3]. Group 4: Company Overview - Meritage Homes Corporation is the fifth-largest public homebuilder in the U.S., based on homes closed in 2023 [7]. - The company specializes in energy-efficient and affordable entry-level and first move-up homes [7]. - Its operations span across multiple states including Arizona, California, Texas, and Florida [7].

Group 1: Stock Splits Overview - Stock splits can make shares more affordable for a wider range of investors and can also signal a change in company strategy [1][3] - Stock splits do not change the market capitalization of a company or the equity position of existing shareholders [2] Group 2: Qiagen Analysis - Qiagen executed a stock split on January 7, involving a synthetic share repurchase of $300 million, which reduced the share count [4] - The company provides molecular testing solutions, including COVID-19 testing, and has shown strong financial performance with an 11% year-over-year growth in adjusted earnings and a 43% increase in free cash flow in Q4 2024 [5][6] - Analysts have a mixed outlook with five recommending to buy and five to hold, with an average price target suggesting nearly 25% upside, and the most bullish target indicating a 39% upside [6][7] Group 3: Meritage Homes Analysis - Meritage Homes completed a 2-for-1 stock split on January 2, increasing share count through a stock dividend, which dilutes shareholders but allows for more dividends [8] - The company focuses on building affordable homes in high-growth states and reported a 12% increase in home sales in 2024, with diluted earnings per share rising 8% to $21.44 [9][10] - Analysts have a generally positive outlook with three buy ratings, three hold ratings, and one sell rating, with the most bullish price target suggesting a 62% upside [11][12]

Core Points - Meritage Homes Corporation has declared a quarterly cash dividend of $0.43 per share, payable on March 31, 2025, to shareholders of record as of March 17, 2025, an increase from $0.375 per share in 2024, reflecting a two-for-one stock split completed on January 2, 2025 [1][2] - The company has renewed its share repurchase program, committing to repurchase $15 million worth of shares each quarter in 2025, with the plan intended to be evergreen unless changed by the company [2] Company Overview - Meritage Homes is the fifth-largest public homebuilder in the U.S., based on homes closed in 2023, and operates in multiple states including Arizona, California, Texas, and Florida [5][6] - The company has delivered nearly 200,000 homes in its 39-year history and is recognized for its energy-efficient homebuilding practices, having received multiple awards from the U.S. Environmental Protection Agency [6]

Financial Performance - In 2024, the company repurchased 1,464,510 shares, representing 2.0% of the shares outstanding, for $125.9 million and paid dividends totaling $108.6 million[31]. - The inventory grew by 21.3% to $5.7 billion, while cash and cash equivalents decreased to $651.6 million from $921.2 million at the end of 2023[31]. - The debt-to-capital ratio increased to 20.6% from 17.9% in 2023, while the net debt-to-capital ratio rose to 11.7% from 1.9%[31]. - As of December 31, 2024, the backlog decreased by 39.4% to 1,544 units from 2,549 units at the end of 2023, with a 42.1% decrease in backlog value to $629.5 million from $1.1 billion[55]. - The company had $40.0 million in both borrowings and repayments under the Credit Facility during the year ended December 31, 2022[228]. Land Acquisition and Development - The company invested approximately $2.5 billion in land acquisition and development, securing about 37,000 net new lots, an increase from 16,000 in 2023[32]. - The company ended 2024 with 85,613 lots under control, up from 64,313 in 2023, with nearly all designated for entry-level communities[32]. - At December 31, 2024, the company had 53,335 owned lots and 32,278 lots under committed purchase or option contracts, totaling approximately $1.4 billion[39]. Construction and Sales - The company closed 15,611 homes and started construction on 15,824 homes during 2024[32]. - The spec inventory per active community increased to 24.1 or 7,029 units as of December 31, 2024, compared to 21.8 or 5,877 units as of December 31, 2023[53]. - At December 31, 2024, 100% of the 1,544 homes in backlog were under construction, indicating a strong commitment to fulfilling sales contracts[54]. - The company aims for a 100% spec home building strategy, which is reflected in the increase of spec inventory[53]. Customer Engagement and Marketing - The strategic shift in mid-2024 focused on real estate agents as the primary customer, supported by the Agents Rock Rewards program[46]. - The company aims to provide a simplified home buying process with pre-selected design combinations, appealing to first-time buyers[47]. - The company offers various sales incentives, including mortgage-related incentives, to attract buyers based on local market conditions[51]. - The company has implemented extensive online tools, including virtual tours and a dedicated Agent Portal, to enhance the customer experience[10]. Workforce and Company Culture - The company employs 1,898 full-time employees, with 473 in sales and marketing, indicating a robust workforce to support operations[73]. - The company was certified as a Great Place to Work® for the second consecutive year and named as Fortune's Best Workplaces for Construction[74]. - The company has a strategy to maintain good relationships with subcontractors and independent consultants[74]. Financial Instruments and Interest Rates - The company has $1.3 billion in aggregate principal amount of senior and convertible senior notes, all bearing fixed rates of interest[227]. - The weighted average interest rate for the senior and convertible senior notes is 3.236%[229]. - The fair value of fixed rate senior and convertible senior notes at December 31, 2024 is $1,284.4 million[229]. - The company’s operations are sensitive to interest rate changes, which may adversely affect revenue and gross margins[229]. - The company does not intend to enter into derivative interest rate swap financial instruments for trading or speculative purposes[229]. Warranty and Quality Control - The warranty reserves for future structural warranty costs are estimated to range between 0.1% to 0.5% of a home's sale price, reflecting a proactive approach to quality control[60]. Seasonal Trends - The company experienced seasonal variations in quarterly operating results, typically taking more orders in the first half of the fiscal year[75].

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Financial Data and Key Metrics Changes - In Q4 2024, Meritage Homes delivered 4,044 homes, achieving a home closing gross margin of 23.2% and a diluted EPS of $4.72, marking a 12% year-over-year decrease in diluted EPS from $5.38 in Q4 2023 [10][47] - The full-year 2024 home closing revenue reached $6.3 billion, a 5% increase from 2023, with a closing gross margin of 24.9%, slightly up from 24.8% in 2023 [11][48] - The company reported a book value per share of $143.98, reflecting a 21% compounded annual growth rate over three years [12] Business Line Data and Key Metrics Changes - Sales orders for Q4 2024 totaled 3,304 homes, with 91% from entry-level homes, up from 88% the previous year, and a cancellation rate of 10% [23] - The average sales price (ASP) for orders was $400,000, down 4% year-over-year due to increased financing incentives and a shift in product and geographic mix [24] - The ending community count increased to 292, a 5% rise from Q3 2024 and an 8% increase from Q4 2023 [25] Market Data and Key Metrics Changes - The average absorption pace improved across all regions, with the central region (Texas) showing the highest at 4.7% per month [27] - The East region had an average absorption pace of 3.8%, while the West region experienced a 10% year-over-year growth in absorption pace to 3.3% [29] - The company anticipates a double-digit year-over-year increase in community count by the end of 2025, driven by favorable demographics and undersupply of homes [30] Company Strategy and Development Direction - Meritage Homes is focused on increasing market share by delivering affordable, move-in ready homes, with a goal of 20,000 units by 2027 [26][60] - The company has expanded its operations into new markets, including Alabama, and is committed to maintaining a strong land position to support growth [19][58] - The company plans to utilize off-balance sheet land financing to enhance capital efficiency, particularly in California [118][126] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the spring selling season, despite a slower start in January, and believes they can achieve their full-year closing guidance [70] - The company is prepared to adjust incentives based on market conditions, with a focus on maintaining margins while achieving volume targets [78][80] - Management remains confident in the long-term growth trajectory, citing strong demand for affordable homes despite current economic challenges [60][134] Other Important Information - Meritage Homes has returned nearly $0.5 billion to shareholders through share buybacks and dividends since 2022 [15] - The company completed a 2-for-1 stock split on January 2, 2025, reflecting confidence in its long-term growth [55] - The effective income tax rate for Q4 2024 was 22.1%, down from 23.2% in Q4 2023, benefiting from energy tax credits [45] Q&A Session Summary Question: Drivers of gross margin trajectory and expectations for 2025 - Management indicated that gross margin is primarily influenced by incentives and that improvements could occur if demand increases and financing costs stabilize [66] Question: Ability to meet full-year closings guidance - Management expressed confidence in meeting guidance, citing current market conditions and inventory levels [71] Question: Strategy regarding volume and margin balance - Management stated they are willing to adjust margins based on market conditions, with a focus on achieving volume targets [78] Question: Community count growth and regional performance - Management noted that community count growth is expected to be steady, with a focus on the Southeast region [111] Question: Long-term land strategy and joint ventures - Management confirmed the initiation of a joint venture for land financing in California, aiming for increased capital efficiency [118][126]

Financial Performance - Home closings increased by 2% in 4Q24, totaling 4,044 units, and by 12% for the full year 2024, reaching 15,611 units[21] - Home closing revenue decreased by 3% to $1.596 billion in 4Q24, but increased by 5% to $6.341 billion for the full year 2024[21] - The average selling price (ASP) on closings decreased by 5% to $395,000 in 4Q24 and by 6% to $406,000 for the full year 2024[21] - Home closing gross profit decreased by 10% to $370 million in 4Q24, but increased by 5% to $1.580 billion for the full year 2024[21] - Diluted EPS decreased by 12% to $4.72 in 4Q24, but increased by 8% to $21.44 for the full year 2024[21] Sales and Orders - Net sales orders increased by 14% year-over-year in 4Q24, reaching 3,304 orders[7,8] - The average absorption pace improved by 8% year-over-year to 3.9 in 4Q24[9,10] - Entry-level homes accounted for 91% of total orders in 4Q24[11,12] Land and Inventory - Total lots controlled increased to 85,613, representing a 5.5-year supply[25] - Of the total lots controlled, 62% are owned and 38% are optioned[25] - Land spend was $808 million, representing 92% of total capital allocation spend[24] Guidance - For the first quarter of 2025, the company projects home closings between 3,200 and 3,500 units and home closing revenue between $1.26 billion and $1.40 billion[28] - The company anticipates a home closing gross margin of around 22% and an effective tax rate of about 24% for the first quarter of 2025[28] - Diluted earnings per common share are projected to be between $1.59 and $1.83 for the first quarter of 2025[28] - For the full year 2025, the company projects home closings between 16,250 and 16,750 units and home closing revenue between $6.6 billion and $6.9 billion[28]

Earnings and Revenue Performance - Earnings per share (EPS) of $4.72 beat the Zacks Consensus Estimate by 113.6% but declined 12% year over year from $5.38 [4] - Total revenues of $1.62 billion decreased 2.3% year over year from $1.66 billion [4] - Total closing revenues of $1.61 billion declined 2% year over year but exceeded the consensus estimate of $1.57 billion by 2.8% [5] - Home closing revenues under the Homebuilding segment fell 3% year over year to $1.595 billion due to lower average sales prices (ASPs) [5] - Land closing revenues increased 49% year over year to $17.4 million [5] Operational Metrics - Homes closed increased 2% year over year to 4,044 units, with ASPs declining 5% to $395,000 [6] - Total home orders rose 14% year over year to 3,304 homes, with dollar value increasing 10% to $1.32 billion [7] - Entry-level buyers accounted for 91% of sales orders, up from 88% in the prior-year period [8] - Backlog units decreased 39% year over year to 1,544, with backlog value down 42% to $629.5 million [8] - Average absorption pace improved 8% year over year to 3.9 homes per month [7] Margins and Expenses - Home closing gross margin contracted 200 basis points (bps) to 23.2%, driven by higher lot costs and financing incentives [9] - Selling, general, and administrative expenses as a percentage of home closing revenues increased 10 bps to 10.8% [10] - Financial Services segment revenues grew 17% year over year to $8.4 million [10] Full-Year 2024 Highlights - Total revenues for 2024 increased 4.2% year over year to $6.4 billion [12] - EPS rose 8% year over year to $21.44 [12] - Homes delivered increased 12% to 15,611, with ASPs declining 6% to $406,000 [12] - Gross margins improved 10 bps to 24.9% [12] Financial Position - Cash and cash equivalents decreased to $651.6 million from $921.2 million at the end of 2023 [13] - Total lots owned or controlled increased to 65,600, including 5,500 from the Elliott Homes acquisition [13] - Total debt to capital rose to 20.6% from 17.9% at the end of 2023, while net debt to capital increased to 11.7% from 1.9% [13] - Net cash used by operating activities was $227.6 million, compared to $355.6 million provided in 2023 [14] - The company paid $108.6 million in dividends and repurchased 732,255 shares for $125.9 million [14] 2025 Guidance - The company expects to close between 16,250 and 16,750 homes, up from 15,611 in 2024 [15] - Revenue is projected to be between $6.6 billion and $6.9 billion, reflecting continued demand for affordable housing [15] Peer Performance - D R Horton reported Q1 fiscal 2025 earnings and revenues beating estimates but declining year over year [16] - D R Horton leveraged mortgage rate buydowns and smaller floor plans to address affordability challenges [17] - KB Home posted strong Q4 2024 results, with revenues and earnings surpassing expectations and increasing year over year [18] - KB Home's strategy focused on faster build times and strong homeownership demand despite mortgage rate pressures [19] - NVR reported Q4 2024 earnings and Homebuilding revenues exceeding estimates, with both metrics increasing year over year [20] - NVR saw strong growth in settlements despite a decline in new orders [21]

Financial Performance - Revenue for Q4 2024 was $1.61 billion, a 2.4% decrease year-over-year [1] - EPS for Q4 2024 was $4.72, a significant increase from $2.69 in the year-ago quarter [1] - Revenue exceeded the Zacks Consensus Estimate by 2.80%, with EPS surpassing estimates by 113.57% [1] Key Metrics Analysis - Home Closing Revenue - Average sales price was $395, slightly below the 10-analyst average estimate of $402.77 [4] - Homes closed totaled 4,044, exceeding the 10-analyst average estimate of 3,885 [4] - Homes ordered were 3,304, slightly below the 10-analyst average estimate of 3,352 [4] - Order Backlog was 1,544, below the nine-analyst average estimate of 1,759 [4] - Active Communities - Ending - Total was 292, below the eight-analyst average estimate of 303 [4] - Order Backlog - Average sales price was $408, slightly above the eight-analyst average estimate of $406 [4] - Order Backlog Value was $629.55 million, below the seven-analyst average estimate of $708.57 million [4] - Homes Ordered Value was $1.32 billion, slightly below the six-analyst average estimate of $1.35 billion [4] Revenue Breakdown - Total closing revenue (Homebuilding) was $1.61 billion, exceeding the 11-analyst average estimate of $1.57 billion, with a year-over-year change of -2.4% [4] - Home closing revenue was $1.60 billion, exceeding the 11-analyst average estimate of $1.56 billion, with a year-over-year change of -2.8% [4] - Land closing revenue was $17.36 million, significantly above the 10-analyst average estimate of $6.15 million, with a year-over-year change of +48.6% [4] - Financial Services revenue was $8.43 million, above the 10-analyst average estimate of $7.43 million, with a year-over-year change of +17.1% [4] Stock Performance - Shares of Meritage returned +5.2% over the past month, outperforming the Zacks S&P 500 composite's +1.7% change [3] - The stock currently has a Zacks Rank 4 (Sell), indicating potential underperformance in the near term [3]