Meritage Homes Corp. Hits 52-Week Low - Analyst Blog

On Apr 25, 2014, shares of Meritage Homes Corporation MTH touched a 52-week low of $38.15 after reporting disappointing first quarter 2014 results on Apr 23. Shares of Meritage eventually closed at $38.26 on Apr 25, with an year-to-date return of -18.9%.

What Led to the Drop?

On Apr 23, Meritage Homes reported weaker-than-expected results in the first quarter 2014. Despite year-over-year increases, Meritage Homes missed the Zacks Consensus Estimate for both earnings and revenue in the first quarter of 2014.

Meritage Homes' first-quarter 2014 earnings per share of 62 cents missed the Zacks Consensus Estimate of 64 cents by 3.1%, which we believe is due to a slowdown in order trends in the quarter Other homebuilders like PulteGroup Inc. PHM and NVR, Inc. NVR also witnessed a decline in orders in their recently reported first quarter results.

The company's net sales orders declined 1.4% year over year to 1,525 units during the quarter, reflecting slower sales pace across the Western region. The Western region reported 26% decline in new sales orders.

Despite the year over year increase, reported revenues missed the Zacks Consensus Estimate of $430 million by 5%, due to weak orders.

The company also expects lower pricing power and increased land costs for 2014, which might led to a decline in home closing gross margin.
 
Most of the estimates moved downward in the past 7 days, following the company's weak earnings release. During the last 7 days, the Zacks Consensus Estimate for second quarter 2014 declined 3.3% to 87 cents per share while that for 2014 declined 6.8% to $3.55 per share.  

Other Stocks to Consider

A better-ranked stock in the homebuilding sector that deserves a mention is William Lyon Homes WLH with a Zacks Rank #1 (Strong Buy).