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Meritage (MTH)
NYSE:MTH
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Meritage
(NYSE:MTH)
73Outperform
Positive Factors
Acquisitions
The acquisition of Elliott Homes is expected to be immediately margin accretive due to the assets-only deal structure and limited competition in Elliott’s Gulf Coast markets.
Earnings
Meritage Homes reported 3Q24 EPS of $5.34, well ahead of estimates, driven by stronger home closings and better home sales gross margins.
Negative Factors
Market Conditions
MTH is experiencing pressure from a more competitive inventory environment, rising rates, and buyer anxiety over election uncertainty.
Meritage (MTH) vs. S&P 500 (SPY)
Market Cap
$5.34B
Dividend Yield2%
Average Volume (3M)1.00M
Price to Earnings (P/E)7.0
Beta (1Y)1.49
Revenue Growth4.18%
EPS Growth7.50%
CountryUS
Employees1,898
SectorConsumer Cyclical
Sector Strength49
IndustryResidential Construction
Share Statistics
EPS (TTM)10.71
Shares Outstanding71,765,915
10 Day Avg. Volume1,098,554
30 Day Avg. Volume1,004,106
Financial Highlights & Ratios
PEG Ratio0.93
Price to Book (P/B)N/A
Price to Sales (P/S)1.13
Price to Cash Flow (P/CF)-13.50
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$97.57Price Target Upside31.02% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering7
Meritage Business Overview & Revenue Model
Company DescriptionMeritage Homes Corporation (MTH) is a leading American homebuilding company that specializes in the design and construction of single-family homes across the United States. With a focus on energy-efficient innovations, Meritage offers a range of home styles and sizes tailored to meet the needs of first-time and move-up buyers. The company operates in key markets including California, Texas, Arizona, Colorado, and Florida, among others, delivering high-quality residential communities with an emphasis on sustainability and modern living.
How the Company Makes MoneyMeritage Homes Corporation generates revenue primarily through the sale of homes. The company purchases land, develops residential communities, and constructs homes that are then sold to consumers. Key revenue streams include the sale of single-family homes, with prices varying based on location, size, and features. Meritage also benefits from strategic partnerships with suppliers and contractors, which help reduce construction costs and improve operational efficiency. Additionally, the company may generate revenue from financial services related to home sales, such as mortgage origination and title services, although its primary focus remains on homebuilding. Market conditions, such as interest rates and regional housing demand, significantly influence Meritage's earnings.
Meritage Financial Statement Overview
Summary
Meritage demonstrates strong financial performance with consistent revenue and profit growth, supported by a robust equity position. However, cash flow management issues, particularly in recent years, pose a challenge that could impact liquidity.Income Statement
Meritage has demonstrated a strong income statement performance, with a consistent increase in total revenue from $3.68 billion in 2019 to $6.36 billion in 2024. The gross profit margin has been solid, showing resilience despite a slight dip in 2024. Net profit margin remains robust, supported by a significant increase in EBIT and EBITDA margins, indicating operational efficiency and effective cost management. Revenue growth has been consistent, with a notable jump from 2021 to 2022.85
Very Positive
Balance Sheet
The balance sheet reflects a stable financial position, with stockholders' equity consistently increasing from $1.97 billion in 2019 to $5.14 billion in 2024, demonstrating strong equity growth. The debt-to-equity ratio has been managed well, though total debt has increased over the years. The equity ratio remains healthy, indicating a solid cushion against liabilities. However, the increase in total liabilities warrants attention to ensure leverage remains within manageable limits.78
Positive
Cash Flow
Cash flow management shows mixed performance. Free cash flow has fluctuated, with significant negative figures in recent years, indicating potential issues in cash generation relative to capital expenditures. The operating cash flow to net income ratio showed volatility, with negative operating cash flow in 2024. Despite the challenges, past years have reflected some positive free cash flow growth, but recent trends suggest the need for improved cash flow management.70
Positive
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 5.48B | 6.36B | 6.14B | 6.30B | 5.15B | 4.51B | Gross Profit |
| 1.66B | 1.58B | 1.52B | 1.80B | 1.44B | 976.00M | EBIT |
| 1.19B | 1.35B | 902.39M | 1.29B | 973.34M | 535.74M | EBITDA |
| 1.22B | 1.03B | 972.93M | 1.31B | 999.59M | 566.79M | Net Income Common Stockholders |
| 905.55M | 786.19M | 738.75M | 992.19M | 737.44M | 423.48M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 651.55M | 651.55M | 921.23M | 861.56M | 618.34M | 745.62M | Total Assets |
| 7.16B | 7.16B | 6.35B | 5.77B | 4.81B | 3.86B | Total Debt |
| 1.31B | 1.31B | 1.06B | 1.15B | 1.16B | 1.02B | Net Debt |
| 654.98M | 654.98M | 141.03M | 289.09M | 541.70M | 274.46M | Total Liabilities |
| 2.02B | 2.02B | 1.74B | 1.82B | 1.76B | 1.52B | Stockholders Equity |
| 5.14B | 5.14B | 4.61B | 3.95B | 3.04B | 2.35B |
| Cash Flow | Free Cash Flow | ||||
| -242.99M | -256.23M | 317.38M | 378.30M | -177.76M | 510.43M | Operating Cash Flow |
| -215.45M | -227.58M | 355.57M | 405.27M | -152.09M | 530.36M | Investing Cash Flow |
| -34.40M | -44.07M | -43.62M | -32.29M | -26.82M | -18.23M | Financing Cash Flow |
| -162.38M | 1.98M | -252.28M | -129.76M | 51.63M | -85.97M |
Meritage Technical Analysis
Negative
74.47
Price Trends
76.39
Negative
83.43
Negative
87.47
Negative
Market Momentum
-0.59
Negative
47.89
Neutral
67.25
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MTH, the sentiment is Negative. The current price of 74.47 is above the 20-day moving average (MA) of 74.02, below the 50-day MA of 76.39, and below the 200-day MA of 87.47, indicating a neutral trend. The MACD of -0.59 indicates Negative momentum. The RSI at 47.89 is Neutral, neither overbought nor oversold. The STOCH value of 67.25 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for MTH.
Meritage Risk Analysis
Meritage disclosed 33 risk factors in its most recent earnings report. Meritage reported the most risks in the “Production” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Meritage Peers Comparison
Overall Rating
UnderperformOutperform
Sector (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $41.76B | 9.47 | 19.35% | 1.04% | 2.12% | 1.63% | |
75 Outperform | $4.48B | 7.57 | 16.52% | 1.56% | 8.10% | 20.03% | |
74 Outperform | $21.43B | 7.31 | 27.40% | 0.76% | 11.74% | 25.66% | |
73 Outperform | $5.34B | 6.98 | 16.12% | 2.00% | 4.18% | 7.50% | |
69 Neutral | $10.62B | 7.35 | 20.38% | 0.86% | 5.86% | 12.20% | |
67 Neutral | $31.94B | 8.75 | 14.30% | 1.60% | 3.47% | 4.22% | |
60 Neutral | $12.39B | 10.47 | 1.07% | 3.58% | 1.64% | -18.33% |
* Consumer Cyclical Sector Average
Performance Comparison
MTH
Meritage
74.47
-4.77
-6.02%
DHI
DR Horton
132.53
-21.26
-13.82%
KBH
KB Home
62.64
-6.57
-9.49%
LEN
Lennar
121.44
-35.50
-22.62%
PHM
PulteGroup
105.84
-7.66
-6.75%
TOL
Toll Brothers
106.83
-15.34
-12.56%
Meritage Earnings Call Summary
Earnings Call Date: Jan 29, 2025 | % Change Since: -5.52% | Next Earnings Date: Apr 23, 2025
Earnings Call Sentiment Positive
The earnings call highlighted Meritage Homes' strong performance in 2024, with record deliveries and revenue, strategic expansions, and a healthy financial position. Despite these achievements, challenges such as higher lot costs, decreased average sales prices, and prolonged development cycle times were evident. The company aims to maintain its growth trajectory while balancing market pressures.Highlights
Record-Setting Year for Meritage
Fourth quarter 2024 deliveries reached 4,044 homes with a home closing gross margin of 23.2% and SG&A leverage of 10.8%, resulting in diluted EPS of $4.72. Full-year 2024 saw the highest closing volume of 15,611 homes and closing revenue of $6.3 billion.
Increased Community Count and Expansion
Fourth quarter 2024 ending community count was 292, an 8% increase from the previous year. The company expanded its operations to new markets, including the Gulf Coast and Huntsville, Alabama.
Strong Financial Health
Meritage maintained a healthy balance sheet with a net debt to cap of 11.7% and ended the year with $652 million in cash.
Significant Shareholder Returns
Returned nearly $0.5 billion to shareholders over the last three years through stock buybacks and dividends. Initiated a 2-for-1 stock split on January 2, 2025.
High Customer Satisfaction
Achieved the highest customer satisfaction scores in 2024 with an avid score of 95%.
Elliott Homes Acquisition
Completed the acquisition of Elliott Homes, adding approximately 5,500 lots and expanding the company's footprint in the Gulf Coast market.
Lowlights
Decreased Average Sales Price
ASP on orders was $400,000, down 4% from the prior year, influenced by a shift in product and geographic mix and greater utilization of financing incentives.
Higher Lot and Financing Costs
Lot costs remained elevated in 2024 and are expected to persist in 2025 and 2026. The cost of financing incentives increased sequentially.
Lower Full-Year Earnings
Despite strong revenue, the net earnings saw a 12% decrease in the fourth quarter of 2024 diluted EPS to $4.72 from $5.38 in 2023.
Continued Challenges with Cycle Times
While construction cycle times have improved, horizontal development cycle times remain longer post-COVID, impacting land development.
Company Guidance
During the Meritage Homes Fourth Quarter 2024 Analyst Call, the company provided forward-looking guidance for the first quarter of 2025, reflecting a 2-for-1 stock split completed on January 2, 2025. The guidance included expectations of total closings between 3,200 and 3,500 units, with home closing revenue projected to be between $1.26 billion and $1.40 billion. The company anticipated a home closing gross margin of around 22% and an effective tax rate of approximately 24%, resulting in projected diluted earnings per share (EPS) ranging from $1.59 to $1.83. For the full year 2025, Meritage Homes guided for closings of 16,250 to 16,750 units and home closing revenue of $6.6 billion to $6.9 billion.Meritage Corporate Events
Executive/Board Changes
Meritage Appoints Geisha Williams to Board of Directors
Positive
Jan 6, 2025
Meritage Homes Corporation has appointed Geisha Williams as an independent Class II Director to its Board of Directors, effective immediately. This appointment highlights the company’s commitment to board diversity and refreshment, with Williams bringing over three decades of experience in the energy and infrastructure sectors. Her extensive leadership background, including her role as former CEO of PG&E Corporation, is expected to enhance the board’s expertise and operational leadership, contributing to Meritage’s strategic growth and industry positioning.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.