Meritage Homes Corporation, Scottsdale (NYSE:MTH) early Thursday reported a net loss of $6.7 million, or ($0.21) per diluted share, for the first quarter of 2011 ended March 31, compared to net earnings of $2.7 million, or $0.08 per diluted share, for the first quarter of 2010. Impairment charges were negligible in both quarters.

The loss missed analyst expectations for a loss of 11 cents per share, sending the stock down nearly 8.5% by early Thursday afternoon.

Home-building revenue was down 12% to $177.5 million as closings fell 16% to 678, which was partially offset by a 5% rise in the average closing price to $262,000, primarily due to more closings in higher-priced communities. The company said 42% of closings and 45% of closing revenue in the quarter came from new communities, compared to 19% of first-quarter 2010 closings and revenue.

New orders fell 21% from last year's tax-credit-fueled quarter to 840, with new order dollars dropping 18% to $220.6 million. The company pointed out, however, that the number of orders was the highest it has been since that quarter. The sales rate was 5.8 per community for the quarter, down from 7 in the prior-year period. The cancellation rate was 17%, down from 18% in last year's quarter.

Backlog was down 30% to 940 homes, with backlog value down 31% to $244.9 million.

Gross margin fell to 17.1% in the quarter from 18.9% in last year's first quarter but up from 15.8% from the fourth quarter of 2010. SG&A was down slightly to $30.4 million from $31.9 million in the prior year quarter. The company attributed the margin contraction to "larger incentives offered in response to weaker market conditions, as well as some negative leverage in our construction overhead due to fewer closings in the first quarter of 2011." It noted, however, that average margins were roughly 500 basis points higher in communities opened since the beginning of 2009.

Meritage said it opened 13 new communities the quarter and closed out 23 older communities, ending the quarter with 141 total active communities, which was down from 149 at the end of last year's quarter. The company said it expected to be back up around 150 by the end of the second quarter.

During the quarter, the company acquired approximately 900 lots for $40 million and contracted for roughly 1,000 more in 17 new communities. The lot count stood at approximately 15,400 at quarter's end, a 4.3-year supply. The company did not provide a breakdown of owned vs. optioned lots or locations.

Meritage ended the quarter with $388 million in cash and cash equivalents, restricted cash and securities. The net debt-to-total-capital ratio was 31% at March 31, 2011, up from 26% at March 31, 2010 and 28% at December 31, 2010.

"When we reported our fourth quarter 2010 results, we indicated that January sales had been slightly better than we expected, and we did achieve sequential improvements in our first quarter orders over the third and fourth quarters of last year," said said Steven J. Hilton, chairman and CEO of Meritage. "However, the spring selling season for the last few months is off to a tepid start, and we have not produced sales at the pace we would have hoped this far into the 2011 selling season. We believe the housing market in general is still bouncing along the bottom, with pockets of strength in certain of our markets."

Michael Rehaut, home-building analyst at J.P. Morgan, was wary. In a research note, he wrote, "Overall, we believe results are modestly below investor expectations, as while orders and margins were roughly in-line with our estimates, we believe they were below consensus estimates. Moreover, MTH pointed to a 'reasonable opportunity' to be profitable in 2011, [which] appears to signal less confidence than during its 4Q10 release in which it noted it expected to be more profitable in 2011 vs. 2010."