Meritage Homes Corp ((MTH)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Meritage Homes highlighted the company’s robust performance in 2024, marked by record-breaking deliveries and revenue, strategic market expansions, and a solid financial standing. However, the call also acknowledged challenges such as rising lot costs, a decrease in average sales prices, and extended development cycle times. Despite these hurdles, Meritage Homes expressed a commitment to sustaining its growth momentum while navigating market pressures.
Record-Setting Year for Meritage
In 2024, Meritage Homes celebrated a record-setting year with fourth quarter deliveries reaching 4,044 homes. The company achieved a home closing gross margin of 23.2% and SG&A leverage of 10.8%, culminating in a diluted earnings per share (EPS) of $4.72. Throughout the year, Meritage recorded its highest closing volume with 15,611 homes and a closing revenue of $6.3 billion.
Increased Community Count and Expansion
Meritage Homes expanded its community count by 8% from the previous year, ending the fourth quarter with 292 communities. The company’s strategic expansion included entering new markets such as the Gulf Coast and Huntsville, Alabama, demonstrating its commitment to growth and market presence enhancement.
Strong Financial Health
The company maintained a strong financial position, ending the year with $652 million in cash and a net debt to cap ratio of 11.7%. This healthy balance sheet underscores Meritage’s ability to manage its finances effectively while pursuing growth opportunities.
Significant Shareholder Returns
Over the past three years, Meritage Homes returned nearly $0.5 billion to its shareholders through stock buybacks and dividends. Notably, the company initiated a 2-for-1 stock split on January 2, 2025, further enhancing shareholder value.
High Customer Satisfaction
The company achieved the highest customer satisfaction scores in 2024, with an avid score of 95%. This reflects Meritage Homes’ dedication to delivering quality homes and exceptional customer service, contributing to its strong market reputation.
Elliott Homes Acquisition
In a strategic move, Meritage Homes completed the acquisition of Elliott Homes, adding approximately 5,500 lots and broadening its footprint in the Gulf Coast market. This acquisition is expected to bolster the company’s growth prospects in a key geographic area.
Decreased Average Sales Price
The average sales price (ASP) on orders fell to $400,000, a 4% decrease from the prior year. This decline was driven by a shift in product and geographic mix, alongside increased utilization of financing incentives.
Higher Lot and Financing Costs
Lot costs remained high in 2024 and are anticipated to continue in 2025 and 2026. Additionally, the cost of financing incentives increased sequentially, reflecting ongoing challenges in the market environment.
Lower Full-Year Earnings
Despite robust revenue figures, Meritage Homes reported a 12% decrease in net earnings for the fourth quarter of 2024, with diluted EPS dropping to $4.72 from $5.38 in 2023. This decline underscores the impact of market challenges on the company’s profitability.
Continued Challenges with Cycle Times
While construction cycle times have shown improvement, horizontal development cycle times remain extended post-COVID, affecting land development processes. Addressing these delays remains a priority for Meritage Homes as it seeks to optimize its development cycle.
Forward-Looking Guidance
Looking ahead, Meritage Homes provided guidance for the first quarter of 2025, reflecting the recent 2-for-1 stock split. The company expects total closings to range between 3,200 and 3,500 units, with home closing revenue projected between $1.26 billion and $1.40 billion. Meritage anticipates a home closing gross margin of around 22% and an effective tax rate of approximately 24%, leading to projected diluted EPS between $1.59 and $1.83. For the full year 2025, the company forecasts closings of 16,250 to 16,750 units and home closing revenue between $6.6 billion and $6.9 billion.
In summary, the earnings call for Meritage Homes presented a positive sentiment with a focus on strategic growth and financial health, despite facing market challenges. The company’s record-breaking performance in 2024, coupled with its strategic expansions and shareholder returns, underscores its resilience and commitment to sustaining growth. As Meritage Homes moves forward, its forward-looking guidance reflects confidence in continued success and adaptation to market dynamics.
