Meritage Homes' Q3 Earnings & Revenues Surpass Estimates

Core Viewpoint - Meritage Homes Corporation reported third-quarter 2024 results with earnings and total closing revenues exceeding the Zacks Consensus Estimate, marking the seventh consecutive quarter of such performance, although both metrics declined year over year [1][3]. Financial Performance - Earnings per share (EPS) was $5.34, surpassing the Zacks Consensus Estimate by 5.7%, but down 11% from $5.98 in the same quarter last year [3]. - Total revenues reached $1.6 billion, a decrease of 1.4% from $1.62 billion year over year [3]. - Total closing revenues were $1.588 billion, down 2% from the prior year but exceeding the consensus estimate of $1.57 billion by 0.7% [4]. Operational Highlights - The company closed 3,942 homes, an 8% increase from the previous year, with an average sales price (ASP) of $402,000, down 9% year over year [5]. - Total home orders increased by 1% to 3,512 homes, but in dollar terms, they decreased by 5% to $1.43 billion due to a 6% lower ASP of $406,000 [6]. - Entry-level buyers constituted 92% of sales orders, up from 88% in the previous year [7]. Strategic Initiatives - The company emphasized a strategic shift towards affordable, quick-turn homes, achieving a 145% backlog conversion and a 17.2% return on equity [2]. - Capital allocation focused on growth, with $659.4 million invested in land, acquiring 7,800 new lots, and returning $57.1 million to shareholders [2]. Margin and Cost Analysis - Adjusted home closing gross margin contracted by 190 basis points to 24.8%, influenced by increased lot costs and financing incentives [8]. - Selling, general and administrative expenses as a percentage of home closing revenues improved by 20 basis points to 9.9% due to lower performance-based compensation costs [9]. Balance Sheet and Cash Flow - Cash and cash equivalents at the end of the third quarter totaled $831.6 million, down from $921.2 million at the end of 2023 [9]. - Total debt to capital ratio increased to 20.7% from 17.9% at the end of 2023, while net debt to capital rose to 8.8% from 1.9% [10]. Shareholder Returns - The company paid quarterly cash dividends of 75 cents per share, totaling $27.1 million, and repurchased 151,220 shares for $30 million [11]. Future Guidance - For Q4 2024, Meritage Homes expects 3,750-3,950 closings, generating revenues between $1.5 billion and $1.59 billion, down from $1.64 billion reported a year ago [12]. - EPS is projected to be between $4.10 and $4.60, a decrease from $5.38 in the previous year [12].