JMP Cuts EPS Estimates For Meritage Homes, Maintains Market Perform

Start generating passive income through real estate.

Own a piece of your favorite cities through diversified real estate investments in the country's top markets

*Terms and conditions apply. Visit Nada's website for more details.

Loading...
Loading...

JMP Securities has cut the EPS estimates for 2016 and 2017 for Meritage Homes Corp MTH while maintaining its Market Perform rating on the stock following its channel checks and corresponding model update.

Analyst Peter Martin has cut his 2016 EPS estimate to $3.60 from $3.62 on a reduced other income assumption. The analyst also trimmed his 2017 EPS estimate to $4.20 from $4.24 on a lower ASP "from a mix-shift to higher entry-level product and lower gross margin." The revised estimates are $0.02 below the consensus estimate for 2016 and $0.07 above the 2017 consensus estimate.

In May, the company guided EPS of $3.55–$3.85 for the year, compared to $3.09 in 2015, including $0.78–$0.85 for the second quarter, compared to $0.70 a year ago.

Related Link: Here's How The Brexit Could Impact The U.S. Housing Market

Meritage expects home closing gross margin of approximately 18–18.5 percent for the year, compared to 19 percent in 2015, and mid-17–18 percent in the second quarter, compared to 19.3 percent in the prior year.

"We believe MTH is working through its product and operational headwinds with the Legendary acquisition, which, coupled with labor and material costs in several other markets, are the primary reasons for the 100bps decrease in gross margin from FY15 to the midpoint of FY16 guidance," Martin wrote in a note.

Looking ahead, the analyst cut his 2017 margin assumption by 40bps "on labor and land costs, higher incentives in more competitive markets, and continued expansion into the higher end of the first-time buyer market."

In addition, JMP said its housing market checks were in line with its thesis of a "modest economic recovery with building momentum at the lower first-time buyer price points and deceleration at the high end."

"Going into the quarter, our primary concerns are land costs across all of MTH's key markets along with labor constraints, specifically in Colorado, Phoenix, Dallas, Atlanta, and pockets of California," Martin added.

At the time of writing, shares of Meritage Homes fell 3.92 percent to $36.23.

Loading...
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorLong IdeasPrice TargetReiterationAnalyst RatingsTrading IdeasReal EstateJMP SecuritiesPeter Martin
We simplify the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...