Meritage Homes Corp. (NYSE:MTH), Scottsdale, AZ. on Thursday morning reported net earnings of $21.0 million, or $0.50 a share, for the first quarter of 2016, up from $16.4 million, or $0.40 a share, in the prior-year quarter. The results beat Wall Street estimates by a nickel a share. Shares of Meritage, however, were down 12% at $33.94 on nearly six times average trading volume by mid-afternoon Thursday.
The company said the performance "primarily reflects higher home closing revenues, greater overhead leverage and the benefit of energy tax credits that reduced the company's effective tax rate."
Operating results at a glance:
The company said the West region (California, Colorado and Arizona) led all regions with a 26% increase in home closing revenue, followed by 11% growth in the East region (Florida, Georgia, the Carolinas and Tennessee) and 5% in the Central region (Texas). Gross margin was 17.4%, down from18.5% in last year's quarter, which the company attributed to higher land and labor costs and a high volume of closings from a under-performing communities within Arizona and southern California where management is working through remaining inventory.
Commissions and other sales costs totaled 7.8% of home closing revenue in the first quarter of 2016, compared to 8.0% in the first quarter of 2015; G&A decreased 70 basis points to 5.0% of total closing revenue in this quarter compared to 5.7% in 1st quarter, 2015.
New orders were flat with 2015; total order value increased 3% year over year. Order value increased 17% in Texas and 7% in the East but dropped 7% in the West. The largest increases outside of Texas came from Georgia, with a 45% increase in total order value, North Carolina, with a 25% increase and South Carolina, with a 16% increase in total order value. Florida and California were off by 15% from the first quarter of 2015 due to early closeouts of high-absorption communities.
Total active community count was 243 at March 31, 2016, a 6% increase over the 229 at the same time last yar. Average orders per community were 8.0 for the first quarter of 2016, down from 8.6 in 2015.
Cash and cash equivalents at quarter's end totaled $172.2 million, compared to $262.2 million at the end of 2015.
Real estate assets increased by $120.9 million for the first quarter, ending at $2.22 billion at March 31, 2016, compared to $2.10 billion at December 31, 2015.
Meritage ended the first quarter of 2016 with approximately 28,400 total lots under control, compared to approximately 29,300 total lots at March 31, 2015 and 27,800 at year-end 2015.
Net debt-to-capital ratio at March 31, 2016 was 42.4%, compared to 40.4% at December 31, 2015, due to the use of cash for land and development, and a growing inventory of homes under construction during the first quarter of 2016.