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Meritage Tops, Revenues Fall

Zacks Equity Research

Meritage Homes Corporation (NYSE:MTH - News) reported net income of $562,000 or 2 cents per share in the second quarter of 2011, significantly lower than $4.2 million or 13 cents per share delivered in the year-ago quarter.

The reported income included asset impairment charges of $590,000 versus $304,000 in the year-ago quarter along with a loss of $3.5 million on early extinguishment of debt.

Excluding these items, the adjusted income for the quarter stood at $1.15 million or 4 cents per share compared with $7.87 million or 24 cents per share in the earlier-year quarter. However, the company’s results were better than the Zacks Consensus Estimate of a loss of 4 cents per share.

Total revenue dropped 24.5% year over year to $220.1 million driven by poor home closings during the quarter. A total of 856 homes were closed in the quarter compared with 1,207 homes in the second quarter of 2010. Net sales orders, however, inched up to 910 units from last year’s 900 units, mainly due to lower cancellation rates. Cancellation rate in the quarter was 15% of gross orders versus 20% in the prior-year quarter.

Homebuilding gross margin was 18.0% compared with 18.2% in the year-ago quarter.  However, adjusted gross margin excluding impairments remained flat year over year at 18.3%.

Meritage’s total actively selling communities stood at 145 at the end of June 2011 compared with 148 at the end of June 2010. Backlog decreased to 994 homes with a total value of $260.8 million at June 30, 2011 from 1,044 homes, valuing at $292.6 million a year ago.

The company had cash and cash equivalents, restricted cash, investment and securities of $377.1 million as of June 30, 2011 compared with $442.1 million as of December 31, 2010. Net debt stood at $229.0 million at the end of the second quarter of 2011 versus $163.4 million at the end of the second quarter of 2010. Net debt to total capital ratio was 31.5% at June 30, 2011 compared with 24.8% at June 30, 2010.

Based in Scottsdale, Arizona, Meritage Homes Corporation, which holds a Zacks #5 Rank (Strong Sell rating) stock, builds single-family homes for a broad range of homebuyers. The company also provides residential financial services including mortgage origination services for its homebuyers. Meritage’s key competitors include Lennar Corp. (NYSE:LEN - News), KB Home (NYSE:KBH - News) and DR Horton Inc. (NYSE:DHI - News).

LENNAR CORP (LEN): Read the Full Research Report

KB HOME (KBH): Read the Full Research Report

D R HORTON INC (DHI): Read the Full Research Report

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