Meritage Homes Q2 net earnings fall 37%

Overview

• Meritage Homes Q2 home closing revenue fell 5% yr/yr to $1.6 bln

• Net earnings for Q2 declined 37% to $147 mln, reflecting lower gross margins

• Diluted EPS for Q2 decreased to $2.04, impacted by higher SG&A and tax rates

Outlook

• Meritage targets $2.0 bln land acquisition and development spend for full year, down from $2.5 bln

Result Drivers

• FINANCING INCENTIVES - Greater utilization of financing incentives led to a decrease in average sales prices, impacting revenue

• HIGHER COSTS - Increased lot costs and terminated land deal charges contributed to lower gross margins

• SPEC STRATEGY - Improved cycle times and spec strategy drove higher backlog conversion rates, according to CEO Phillippe Lord

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 6 "strong buy" or "buy", 7 "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the homebuilding peer group is "buy"

• Wall Street's median 12-month price target for Meritage Homes Corp is $89.00, about 15.3% above its July 22 closing price of $75.37

• The stock recently traded at 9 times the next 12-month earnings vs. a P/E of 7 three months ago

Press Release: ID:nGNX3t85rk