Factors Setting the Tone for Meritage Homes' (MTH) Q2 Earnings

Core Viewpoint - Meritage Homes is expected to report second-quarter 2024 earnings that reflect a mix of challenges and opportunities, with a consensus estimate for EPS showing a slight increase year-over-year, despite pressures from high mortgage rates and changing market conditions [2][7][10]. Financial Performance - The Zacks Consensus Estimate for second-quarter 2024 EPS has risen to $5.17, a 3% increase from the previous year’s $5.02 [2]. - Home closing units are projected to be between 3,600 and 3,800, up from 3,490 units reported a year ago, indicating a positive trend in unit sales [3]. - Home closing revenues are anticipated to be in the range of $1.5 billion to $1.6 billion, slightly up from $1.54 billion in the prior year [3]. Revenue Segmentation - Homebuilding revenues are expected to decline by 1.4% year-over-year to $1.5 billion, while financial services revenues are projected to increase by 12.7% year-over-year to $7 million [4]. - The overall revenue consensus is pegged at $1.58 billion, reflecting a 0.5% year-over-year increase, driven by solid demand for entry-level homes [12]. Margins and Costs - The company expects home closing gross margin to improve to around 24.9%, up from 24.4% in the previous year, indicating a focus on margin enhancement despite rising labor costs [24]. - High labor costs are anticipated to negatively impact margins in the upcoming quarter, although strategic initiatives may help mitigate some of these challenges [10]. Market Dynamics - The average selling price (ASP) for home closings is expected to decrease by 6% year-over-year to $415,790, influenced by a shift in product mix [8]. - Geographically, ASP is expected to decline across various regions, with the West, Central, and East regions seeing decreases of 4.1%, 12.5%, and 3% respectively [13]. Backlogs and Orders - Total backlog is expected to decline by 9.6% to 3,409 units, with the total backlog value falling 16.2% year-over-year to $1.4 billion [14]. - Home orders are projected to decrease in the West and East regions, while the Central region is expected to see a 5.6% increase in orders due to favorable economic conditions [15].