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Meritage (MTH) Up 5.4% Since Last Earnings Report: Can It Continue?
Meritage HomesMeritage Homes(US:MTH) ZACKSยท2025-08-22 16:36

Core Viewpoint - Meritage Homes reported a mixed performance in its Q2 2025 earnings, with earnings surpassing estimates but revenues declining year-over-year due to ongoing housing market challenges [2][3][5]. Financial Performance - Earnings per share (EPS) for Q2 2025 was $2.04, exceeding the Zacks Consensus Estimate of $1.99 by 2.5%, but down 35% from $3.15 in the prior year [5]. - Total revenues amounted to $1.63 billion, a decrease of 4% from $1.70 billion in the same quarter last year [5][6]. - Total closing revenues were $1.62 billion, down 4% year-over-year but above the consensus estimate of $1.59 billion [6]. Segment Performance - Home closing revenues were $1.61 billion, declining 5% from the previous year due to lower average selling prices (ASPs) [6][7]. - The average selling price of homes closed decreased by 6% to $387,000, influenced by increased financing incentives [7]. - The backlog at the end of the quarter totaled 1,748 units, down 36% year-over-year, with a backlog value of $695.5 million, a decrease of 37% [8]. Cost and Margin Analysis - Home closing gross margin contracted by 480 basis points to 21.1%, primarily due to rising lot costs and increased financing incentives [8]. - Selling, general and administrative (SG&A) expenses rose to 10.2% of home closing revenues, up from 9.3% in the prior year, attributed to lower leverage on fixed costs and higher commissions [9]. Financial Position - As of June 30, 2025, cash and cash equivalents were $930.5 million, an increase from $651.6 million at the end of 2024 [11]. - The total debt-to-capital ratio increased to 25.8% from 20.6% a year ago, while net debt to capital rose to 14.6% from 11.7% [11]. Future Guidance - For Q3 2025, the company expects home closings between 3,600 and 3,900, down from 3,942 in the prior year [13]. - Projected home closing revenues are between $1.4 billion and $1.56 billion, down from $1.59 billion reported a year ago [13]. - Expected diluted EPS for Q3 2025 is between $1.51 and $1.86, significantly lower than $5.34 reported in the same quarter last year [13]. Industry Comparison - Meritage Homes is part of the Zacks Building Products - Home Builders industry, where D.R. Horton reported revenues of $9.23 billion, a year-over-year decline of 7.4% [18]. - D.R. Horton has a Zacks Rank of 3 (Hold), while Meritage has a Zacks Rank of 4 (Sell), indicating differing market sentiments [19].