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Meritage Homes (MTH) Gears Up for Q3 Earnings: What's Up?

Zacks Equity Research

Meritage Homes Corporation MTH is slated to report third-quarter 2019 results on Oct 22, after market close.

In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 27.2% and 7.2%, respectively. In fact, the company surpassed earnings estimates in 14 of the trailing 15 quarters.

Solid homebuilding fundamentals are likely to have supported its third-quarter results.

How are Estimates Faring?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has been revised 0.7% upward over the past 30 days to $1.49. This indicates an increase of 12.3% from the year-ago earnings of $1.33 per share. Revenues are also expected to rise 3.6% from the prior-year quarter to $916.38 million.


Meritage Corporation Price and EPS Surprise


Meritage Corporation Price and EPS Surprise

Meritage Corporation price-eps-surprise | Meritage Corporation Quote

Factors at Play

Meritage Homes’ focus on growing demand for entry-level and first-move-up buyers is expected to have benefited third-quarter earnings. The successful execution of strategic initiatives to boost profitability and building homes on spec basis for LiVE.NOW. communities are likely to have boosted its performance in quarter to be reported.

The company’s solid order volume, which marked a 13-year record high during the second quarter, is likely to have contributed to third-quarter revenues as well.

Meanwhile, in order to address the needs of millennials and baby boomers who want affordable homes and highly desirable communities, the company reduced the average selling price or ASP for the homes. Although this strategy is likely to have improved buyers traffic, the same is expected to have weighed on third-quarter revenues.

The Zacks Consensus Estimate for ASP is currently pegged at $385, implying a 5.2% decrease from the year-ago reported figure.

The Zacks Consensus Estimate for the company’s home closing revenues is currently pegged at $919 million, implying 4.5% growth from the year-ago reported figure and 6.1% sequentially.

The company is inclined toward maximizing profits on every sale. To this end, it has been making homes out of speculations that promise faster delivery at a lower cost. This strategy is expected to have boosted its bottom-line performance during the quarter.

That said, higher land or labor costs — which have been a pressing concern for the U.S. homebuilding industry over the last few quarters — are expected to get reflected in the company’s bottom-line number.

What the Zacks Model Unveils

Our proven model shows that Meritage Homes is likely to beat estimates this earnings season. This is because it has the right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Meritage Homes has an Earnings ESP of +1.34%. This is because the Most Accurate Estimate of $1.51 per share is pegged higher than the Zacks Consensus Estimate of $1.49. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: It currently sports a Zacks Rank #1.

Other Stocks Worth a Look

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

Jacobs Engineering Group Inc. JEC has an Earnings ESP of +1.14% and holds a Zacks Rank #2.

NVR, Inc. NVR has an Earnings ESP of +4.87% and carries a Zacks Rank #3.

Masco Corporation MAS has an Earnings ESP of +0.53% and a Zacks Rank #3.

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