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Meritage Homes Offers Peek into 2Q

Zacks Equity Research

Meritage Homes Corporation (MTH) has announced preliminary home order, closing and backlog numbers for the second quarter of 2012.

Total home orders climbed 49% year over year to 1,353 units during the quarter, helped by the company’s investment in well-positioned and high-priced land and new communities in desirable locations. The company has reported a year-over-year increase in orders for the past eight months.

The company’s backlog totaled 1,611 homes as of June 30, 2012, up 62% from 994 homes as of June 30, 2011. The value of backlog grew 75% year over year to $457.7 million in the second quarter of 2012. 

The cancellation rate in the reported quarter also improved to 13% of gross sales versus 15% in the second quarter of 2011. The steady decline in the cancellation rate over the past two quarters implies that the backlog will not be a headwind for the company.

Meritage Homes’ strategy to expand operations in growing cities is encouraging, since demand is likely to be steadier there. The gradual recovery in the housing market is also turning out to be advantageous, going by the solid top-line growth and modest price hikes in the recently concluded quarter.

The overall demand for new homes is expected to remain sluggish for some time as oversupply of homes and tight credit standards may remain headwinds.

Meritage Homes Corporation carries a Zacks #3 Rank in the near term (Hold rating), similar to one of its peers, KB Home (KBH).

Meritage Homes is one of the largest home building companies in the United States. Meritage builds homes for first-time buyers for low monthly payments, active adult buyers of higher age group and move-up buyers (those who already have a home). The company also offers high-priced luxury homes. Meritage has 150 communities in 15 metropolitan cities in the U.S.

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