Loading...
•
Sep 30, 2020
Meritage Homes Q3 2020 Earnings Report
Meritage Homes' Q3 2020 results reflected a strong performance, marked by record orders, revenue, and gross margin, driven by robust housing market demand and the company's strategic focus on affordable entry-level homes.
Key Takeaways
Meritage Homes reported a remarkable third quarter in 2020, achieving record sales orders, the strongest absorptions since 2005, record home closing revenue, and the best quarterly gross margin since 2014. The company's net earnings increased by 56% compared to the third quarter of 2019, driven by a 21% increase in home closing revenue and a 21.5% gross margin. These results reflect the strength of the housing market and the success of Meritage's strategy of focusing on affordable entry-level and first move-up homes.
Sales orders increased by 71% year-over-year, surpassing the previous quarterly record set in Q2 2020, driven by a 94% increase in absorption pace due to high demand for entry-level homes.
Home closing revenue reached a record $1.1 billion, a 21% increase year-over-year, reflecting a 24% increase in home closing volume.
Home closing gross margin improved to 21.5%, a 170 bps increase from the previous year, driven by increased closing volume and operational efficiencies.
Net earnings increased by 56% year-over-year to $109.1 million ($2.84 per diluted share), driven by increases in home closing revenue, gross margins, and improved overhead leverage.
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 projects 11,200-11,500 total home closings for approximately $4.2-4.4 billion in total home closing revenue and a home closing gross margin of 21.0-21.5% for the full year 2020. The company expects this to translate into approximately $10.25-10.50 diluted earnings per share, a year-over-year increase of more than 60%.
Positive Outlook
- Projecting 11,200-11,500 total home closings for the year.
- Expecting approximately $4.2-4.4 billion in total home closing revenue.
- Anticipating a home closing gross margin of 21.0-21.5% for the full year.
- Estimating diluted earnings per share of approximately $10.25-10.50.
- Expecting a year-over-year increase of more than 60% in diluted earnings per share.
Challenges Ahead
- Potential disruptions to business by COVID-19.
- Availability and cost of finished lots and undeveloped land.
- Shortages in the availability and cost of labor.
- Changes in interest rates and the availability and pricing of residential mortgages.
- Inflation in the cost of materials used to develop communities and construct homes.
Revenue & Expenses
Visualization of income flow from segment revenue to net income