Meritage Homes Corporation MTH reported third-quarter 2024 results, wherein earnings and total closing revenues topped the Zacks Consensus Estimate but declined year over year. This is the seventh consecutive quarter of earnings and revenues beat.

Shares of this Scottsdale, AZ-based homebuilder lost 0.6% in the after-hour trading session on Oct. 29.

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Meritage Homes’ third-quarter results highlight a strategic shift to affordable, quick-turn homes, driving $1.6 billion in revenues and record closing volume. The company reported a 145% backlog conversion and a 17.2% return on equity. Capital allocation focused on growth with $659.4 million in land investments, 7,800 new lots, and $57.1 million returned to shareholders.

Earnings & Revenue Discussion

Earnings per share (EPS) of $5.34 topped the Zacks Consensus Estimate by 5.7%. The reported figure decreased 11% from the year-ago quarter’s reported EPS of $5.98.

Total revenues (including Total Closing revenues and Financial Services revenues) amounted to $1.6 billion, down 1.4% from $1.62 billion reported in the year-ago period.

Meritage Homes Corporation Price, Consensus and EPS Surprise

Meritage Homes Corporation price-consensus-eps-surprise-chart | Meritage Homes Corporation Quote

Segment Discussion

Total Closing Revenues: Total closing revenues were $1.588 billion, which declined 2% from the prior-year quarter’s level but topped the consensus mark of $1.57 billion by 0.7%.

Under the Homebuilding umbrella, home closing revenues of $1.586 billion declined 2% from the prior-year quarter’s level due to a lower average sales price (ASP). Land closing revenues also dipped 4% to $2.7 billion from a year ago.

Meritage Homes reported 3,942 units of homes closed, up 8% from the year-ago quarter. The ASP of homes closing declined 9% from a year ago to $402,000 due to product and geographic mix. Our model’s estimate for the metric was 3,755 units for an ASP of $413,270.

Total home orders inched up 1% from the prior year to 3,512 homes. In dollars, home orders decreased 5% year over year to $1.43 billion. A 6% lower ASP of $406,000 due to both geographic and product mix shifts impacted growth to some extent. We estimated home orders to be up 17.9% year over year. The average absorption pace was 4.1 per month in the quarter, the same as last year. Ending community count was 278, up 2.2% year over year but 3.1% sequentially.

Entry-level buyers represented 92% of sales orders compared with 88% in the year-ago period.

The quarter-end backlog totaled 2,284 units, down 37% year over year. The value of the backlog also decreased 40% year over year to $931.7 million.

Adjusted home closing gross margin contracted 190 basis points (bps) to 24.8%. This decline was driven by increased lot costs, higher use of financing incentives, and reduced leverage on fixed costs due to lower home closing revenue. However, the impact was partially offset by cost-saving measures and faster construction cycle times.

Selling, general and administrative expenses — as a percentage of home closing revenues — improved 20 bps from the prior-year quarter to 9.9% owing to lower performance-based compensation costs.

Financial Services: The segment’s revenues rose 32% from the prior-year quarter’s level to $8.1 million.