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Lumber Liquidators, Two Builders Shine As Housing Revives

Strong earnings reports Wednesday from Lumber Liquidators (LL), Meritage Homes (MTH) and Ryland Group (RYL) suggest the housing recovery is strong and may be picking up steam.

Lumber Liquidators said Q1 earnings shot up 97% to 57 cents a share. Revenue grew 22.5% to $230.4 million, as growth has improved over the past two years. Wall Street had seen EPS of 42 cents on sales of $215.4 million.

The hardwood flooring retailer's same-store sales rose a hefty 15.2% vs. a year earlier.

The Price Is Right March existing-home prices rose 11.8%, the best annual gain since late 2005, the National Association of Realtors said Monday. That's helped Lumber Liquidators as more homeowners spruce up their properties.

"Homeowners put off remodeling with all the negative news during the recession," said Peter Keith, a senior research analyst for Piper Jaffray. "Rising home prices in general encourage people to take on more remodeling.

Homeowners are taking on more and larger discretionary projects, according to a survey by Piper Jaffray. Harwood flooring, Lumber Liquidators' specialty, is one of the most popular.

Lumber Liquidators shares shot up 12% to 78.68, hitting a record 80.70 intraday.

Meritageand Ryland also trumped Q1 earnings forecasts as tight supply fuels housing demand and prices.

Meritage swung to a per-share profit of 32 cents vs. a Q1 2012 loss of 15 cents. Revenue leapt 65% to $336.4 million, the best gain in years. Analysts expected sales of $324.4 million and a 24-cent gain.

"Housing demand is greater than the supply of homes available for sale in many of the areas where we operate, causing home prices to increase," CEO Steven Hilton said in a release.

To meet the higher demand, Meritage opened 24 communities during the quarter.

Meritage jumped 8% to 48.75, clearing its late March peak. The stock has surged 17% this week.

After the market close, Ryland reported Q1 EPS of 43 cents vs. a 7-cent loss last year, beating analyst estimates by 15 cents. Revenue rose 73% to $374.7 million also above views. New orders rose 54% to 2,051 units.

Shares rose 3% late after a 3% gain to 41.70 during the regular session.

Homebuilder stocks had lagged the general market since the last wave of earnings reports raised some concerns about rising land costs and other issues.

Meritage quelled some fears, reporting it spent $75 million to add 1,600 lots under contract.

Ryland's gross margin rose to 19.4% vs. 17.5% in Q1 2012 on more homes delivered and at a higher average closing price. Rising land costs partially offset that.

Meritage sees housing trends improving for the rest of 2013. It sees full-year EPS of $2.20-$2.45. That's well above analyst estimates for a 138% spike to $1.95.

Job growth, the ultimate support for housing demand, remains lackluster. But employment is rising, while the Federal Reserve's easy-money policies keep mortgage rates low.

"We believe job growth in most of our markets has increased demand for homes, and the limited supply of available resale homes has driven more prospective homebuyers to new construction," Hilton said. "Existing homeowners are also choosing to take advantage of historically low interest rates and very affordable prices to trade up, increasing the demand for new homes in already constrained markets."