Meritage narrowed its net loss to $4.8 million or ($0.15) per diluted share for the first quarter of 2012, compared to a net loss of $6.7 million or ($0.21) per diluted share for the first quarter of 2011, due to increased closings and revenue, combined with lower overhead and interest expense.
"We have been operating around break-even for the last two years, excluding the impairments related to winding down our Las Vegas operations, and just a small number of home closings can make the difference between being profitable in a quarter," said Mr. Hilton. "We expected to report a loss in the first quarter due to our seasonally low fourth quarter sales and backlog entering the quarter.
The company reported the highest quarterly sales orders since 2Q 2009 and the highest total sales value since 2Q 2008, with year over year sales gains in every state except Nevada.
It had the highest average sales per community since the first quarter of 2008 -- 29% increase over 1Q 2011.
The backlog was the highest in units and value since the first quarter of 2010.
The stock trades at a forward P/E of 19.
"Our spring selling season got off to a strong start, as evidenced by our 36% increase in sales in the first quarter," said Steven J. Hilton, chairman and chief executive officer of Meritage Homes. "Consumer confidence has improved, and more buyers are searching for homes while inventories of existing homes have declined substantially in many of our markets. Our new website and national Contact Center are driving traffic to our well-positioned communities, where our sales teams have done an excellent job converting that traffic to sales. Our monthly sales have grown progressively since November last year, and March was our best sales month since June of 2008."
"As demand has strengthened, we've begun to raise prices in most of our communities this year," said Mr. Hilton. "While certain of our best communities have seen several price increases in 2012 already, most increases have been modest to date, but demonstrate that the market is getting stronger."
The total value of orders in backlog at March 31, 2012 increased by 44% over March 31, 2011, due to a 38% increase in units and a 4% increase in average sales prices, mainly reflecting a shift toward higher-priced states and communities, in addition to modest price increases.
This company has been able to breakeven after the biggest housing bubble since the Great Depression. The industry is starting to recover and better time lie ahead.
Home sales are up, backlogs are growing and home prices are starting to increase. The stock has been in a steady up trend since April. It has not given back gains during the recent market decline and it is breaking out to a new 52-week high. The stock has consolidated and now it has moved through resistance.
I love the stock, but the market looks weak. I like selling the July $25 puts, buying the July $30 calls and selling the July $35 calls for a net debit of $1.20. If the market breaks below the the 200-day MA, get out and wait for a better entry point. This stock should continue to grind higher.