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Supply Chain Woes to Dent Meritage Homes' (MTH) Q4 Earnings?

Zacks Equity Research
·4-min read

Meritage Homes Corporation MTH is slated to report fourth-quarter 2021 results on Jan 26, after market close.

In the last reported quarter, the company’s earnings and home closing revenues topped the Zacks Consensus Estimate by 13.6% and 3.5%, respectively, on strong demand. Also, both the metrics improved 85% and 11%, respectively, on a year-over-year basis. The company surpassed earnings estimates in the trailing 12 quarters.

Trend in Estimate Revision

The Zacks Consensus Estimate for fourth-quarter 2021 earnings has moved 18.6% south over the past 30 days to $6.04 per share. Nonetheless, the said figure indicates a 52.1% increase from the year-ago earnings of $3.97 per share. The consensus mark for revenues is $1.5 billion, suggesting a 6.6% year-over-year improvement.

Meritage Homes Corporation Price and EPS Surprise

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

Factors to Note

Despite unprecedented supply chain issues and increased inflation, Meritage Homes’ fourth-quarter revenues are expected to have increased from the year-ago level, buoyed by strong housing market fundamentals.

Meritage Homes announced that it has been experiencing solid demand for homes (especially entry-level homes). Meritage Homes has been focused on growing demand for entry-level homes with its LiVE.NOW product that addresses the need for lower-priced homes.

The Zacks Consensus Estimate for the company’s homes closed is pegged at 3,513 units, which indicates a year-over-year decrease from 3,744 but sequential growth from 3,112 homes. The same for the company’s home closing revenues is pegged at $1,498 million, which indicates a 6.3% increase from the year-ago period and 19.7% sequential growth.

Meritage Homes has been witnessing industry-wide supply chain challenges, municipal delays, and higher material and labor costs.

Despite making spec homes at lower cost, MTH’s earnings are likely to have been under affordability-related pressure. Yet, to make it reasonable for buyers, Meritage Homes has been building entry-level and affordable first time move-up communities and first move-up communities, which in turn is anticipated to have benefited margins. The Zacks Consensus Estimate for the company’s homes closed gross margin is pegged at 28.8%, which indicates a 480-basis point increase from the year-ago period.

Other Projections

The Zacks Consensus Estimate for total closing revenues (Homebuilding) is $1,504 million, indicating 6.7% growth from the year-ago figure of $1,410 million. Backlog for fourth-quarter 2021 is pegged at 5,681 homes, indicating an increase from 4,672 units reported a year ago. Potential value of the backlog is pegged at $2,449 million, indicating a rise of 35.1% year over year.

The Zacks Consensus Estimate for financial services revenues is pegged at $6.07 million, suggesting 5.2% year-over-year growth.

What the Zacks Model Says

Our proven model predicts an earnings beat for Meritage Homes this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: Meritage Homes has an Earnings ESP of +0.72%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combination

Here are some other companies, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

D.R. Horton, Inc. DHI has an Earnings ESP of +2.72% and a Zacks Rank #2.

DHI’s earnings topped the consensus mark in all the last four quarters, with the average being 14.1%.

PulteGroup, Inc. PHM has an Earnings ESP of +1.88% and a Zacks Rank #2.

PHM’s earnings topped the consensus mark in three of the last four quarters and missed once, with the average surprise being 3.8%.

Boise Cascade Company BCC has an Earnings ESP of +9.09% and a Zacks Rank #1.

BCC’s earnings topped the consensus mark in all the last four quarters, with the average being 45.5%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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PulteGroup, Inc. (PHM) : Free Stock Analysis Report

D.R. Horton, Inc. (DHI) : Free Stock Analysis Report

Meritage Homes Corporation (MTH) : Free Stock Analysis Report

Boise Cascade, L.L.C. (BCC) : Free Stock Analysis Report

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