Meritage Homes Corporation:  Initiation of Coverage – These Are The 3 Biggest Growth Catalysts For The Company!

This is our first report on Meritage Homes Corp. The company’s Q4 2023 sales orders increased 60% year on year, with strong home buying demand and a slight pullback in interest rates. The company achieved a record backlog conversion of 110%, leading to home closing revenue of $1.6 billion. While overall results were robust, home closing gross margin remained flat at 25.2%, and SG&A increased to 10.7%, leading to a diluted EPS of $5.38. The decline in EPS is attributable to increased home closing revenue and greater overhead costs, which offset improvements in the company’s streamlined operations. Meritage Homes sees several positive trends going forward, such as a shift by homebuyers to new homes amid a constrained resale home supply and its competitive advantage with the millennial and Gen Z consumer segments.