On Friday, an analyst from Evercore ISI increased the price target for Meritage Homes (NYSE:MTH) shares to $257 from the previous $221, while maintaining an Outperform rating on the stock. This adjustment follows Meritage Homes' impressive second-quarter performance, which surpassed both the analyst's and the consensus estimates.
Meritage Homes reported an adjusted diluted earnings per share (EPS) of $6.31 for the second quarter of 2024, exceeding the expectations of $5.33 from Evercore ISI and the consensus estimate of $5.14.
The company's financial results showcased significant strength, with gross margins reaching 25.9%, compared to the estimated 25.0%. Additionally, the number of closings for the quarter was higher than anticipated, with 4,100 homes closed versus the 3,800 estimated.
The homebuilder also experienced a 14% year-over-year increase in net orders, although this was slightly below the estimated 15%. The average order price remained robust at $414,000. In conjunction with the earnings report, Meritage Homes raised its full-year 2024 guidance for several key metrics, including the number of closings, home closing revenue, and diluted EPS.
Despite the strong quarter, some analysts may express concerns regarding the company's gross margin guidance for the remainder of 2024. The second-quarter beat suggests a potential drop to 24% or less in the second half of the year.
However, the company has indicated that this forecast includes the possibility of increased incentives and potential market weakness around the presidential election in November.
Notably, Meritage Homes reduced its incentive spending in the quarter, which, along with the implementation of its new business strategy, has contributed positively to margins. The company also highlighted that its move-in package has been modestly accretive to margins, contrary to expectations.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.