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Jun 30, 2020
Meritage Homes Q2 2020 Earnings Report
Meritage Homes reported record orders and increased net earnings driven by revenue growth and margin improvement.
Key Takeaways
Meritage Homes reported a strong second quarter with record orders, a 20% increase in revenue, and a 78% increase in net earnings. The company's strategic focus on the entry-level market and efficient operations drove significant improvements in gross margin and overhead leverage, resulting in a strong balance sheet.
Total orders increased 32% year-over-year, driven by a 42% increase in absorption pace.
Home closing revenue increased 20% due to a 23% increase in home closing volume.
Home closing gross margin increased 300 bps to 21.4% due to streamlined operations and cost efficiencies.
Net earnings increased 78% to $90.7 million, or $2.38 per diluted share.
Meritage Homes
Meritage Homes
Meritage Homes Revenue by Geographic Location
Revenue by Geographic Location
West Region Revenue
CapyFin.comCentral Region Revenue
CapyFin.comEast Region Revenue
CapyFin.com Forward Guidance
Meritage Homes anticipates generating between $4.0-4.3 billion in home closing revenue for the year, including $1.0-1.1 billion for the third quarter, with home closing gross margins around 21% for the third quarter and full year. This is expected to translate to approximately $8.75-9.25 of diluted earnings per share for the full year, including approximately $2.15-2.35 for the third quarter.
Positive Outlook
- Projected home closing revenue between $4.0-4.3 billion for the year.
- Expected home closing revenue of $1.0-1.1 billion for the third quarter.
- Anticipated home closing gross margins around 21% for the third quarter and full year.
- Estimated diluted earnings per share between $8.75-9.25 for the full year.
- Projected diluted earnings per share between $2.15-2.35 for the third quarter.
Challenges Ahead
- Risks and uncertainties in the economy until the pandemic is brought under control.
- Potential adverse impacts of the COVID-19 pandemic.
- Fluctuations in quarterly operating results.
- Limited geographic diversification.
- The availability and cost of finished lots and undeveloped land.
Revenue & Expenses
Visualization of income flow from segment revenue to net income