Meritage Homes Reports Strong Q4 2024 Results
Meritage Homes Corporation (NYSE: MTH), a leading U.S. homebuilder, reported its fourth quarter and full-year results for the year ending December 31, 2024, showcasing strong growth and strategic initiatives that reinforced its position in the market despite a challenging economic backdrop.
Fourth Quarter Overview
Meritage Homes reported solid operational results for the fourth quarter of 2024, with home closings reaching 4,044 units, a 2% increase from the previous year. Home closing revenue for the quarter was $1.6 billion, slightly down by 3% year-over-year, mainly due to a decrease in the average sales price (ASP) on closings, which dropped by 5% to $395,000. This decline in ASP was attributed to increased financing incentives and shifts in product mix. Despite these challenges, the company’s strategy focusing on affordable, move-in-ready homes continued to drive demand, particularly in the entry-level home market, which represented 91% of the quarter’s closings.
The company’s backlog, which tracks homes yet to be closed, ended the quarter with 1,544 units, a significant 39% decrease from the previous year. This reduction was primarily due to the higher number of homes being sold in the quarter and a more challenging economic environment.
Meritage saw a decrease in home closing gross margin to 23.2%, down from 25.2% a year ago, largely due to increased lot costs and higher financing incentives. However, operational efficiencies, such as lower direct costs per square foot and improved cycle times, helped to mitigate the margin pressures.
Despite the reduced revenue and margins, the company’s net earnings for the fourth quarter were $172.6 million, or $4.72 per diluted share, reflecting a 13% decrease compared to the prior year. The drop in earnings was attributed to lower home closing revenue and margins, though Meritage’s solid backlog conversion rate of 177%—a company record—helped support strong operational performance.
Full-Year Performance
For the full year 2024, Meritage Homes posted a 12% increase in homes closed, totaling 15,611 units, setting a new record for the company. Home closing revenue for the year reached $6.34 billion, a 5% increase from the prior year, driven by the growth in home closing volume, despite a 6% decrease in ASPs. This demonstrates Meritage’s resilience in capturing demand for entry-level homes, which continues to be a key focus for the company.
The company’s full-year gross margin was 24.9%, slightly higher than the previous year, reflecting operational improvements in cycle times and cost control. SG&A as a percentage of home closing revenue was 10.1%, a slight decrease from the 10.2% in 2023, thanks to efficiencies in administrative and selling costs.
Net earnings for 2024 totaled $786.2 million, or $21.44 per diluted share, representing a 6% increase over the previous year. This growth was fueled by higher home closing revenue and slightly lower overhead costs. Meritage also saw a strong return on equity of 16.1% and a book value per share increase of 12.9% year-over-year to $142.98.
Capital Allocation & Investments
Meritage Homes continued to focus on strategic growth initiatives in 2024. The company’s land acquisition and development spend totaled $741.5 million for the fourth quarter, reflecting a 13% increase from the previous year. This included the acquisition of Elliott Homes, a private builder known for constructing entry-level homes in Mississippi, Alabama, and the Florida Panhandle. The acquisition brought approximately 5,500 lots under control, further expanding Meritage’s land position.
The company also continued to return capital to shareholders through dividends and share repurchases. In the fourth quarter, Meritage declared a dividend of $0.75 per share, totaling $27 million, an increase from $0.27 per share in the same period last year. For the full year, the company paid dividends of $108.6 million, a significant rise from $39.5 million in 2023. In addition, Meritage repurchased $40 million of its shares during the fourth quarter, with a total of $125.9 million repurchased throughout 2024.
The company’s balance sheet remains strong, with cash and cash equivalents totaling $651.6 million at year-end. Its net debt-to-capital ratio stood at a modest 11.7%, reflecting prudent financial management and ample liquidity. Meritage also completed a two-for-one stock split on January 2, 2025, further enhancing shareholder value.
Outlook for 2025
Looking ahead, Meritage Homes remains optimistic about the future, bolstered by favorable demographics for its product offerings and an undersupply of homes at its price points. With a solid backlog of orders and a continued focus on affordable, move-in-ready homes, the company is well-positioned to capture demand during the spring selling season.
Steven J. Hilton, executive chairman of Meritage Homes, emphasized the company’s competitive advantage: “We believe that we are well-positioned to capture demand in the spring selling season while continuing to grow our market share.” This is supported by a favorable economic backdrop, including stability in the job market, which continues to drive demand for Meritage’s affordable housing options.
In conclusion, Meritage Homes’ strong operational results, strategic investments, and capital return initiatives in 2024 set the stage for continued growth in 2025. Despite challenges in ASPs and margins, the company’s commitment to affordability and operational excellence positions it to thrive in the coming year.