UPDATE 4-Meritage reports surprise profit
* Q3 profit 4 cents/share vs loss 56 cents/share last year
* $800,000 in land writedowns
* Orders down 36 pct
* "Things haven't really improved" (Adds company projection and comment about products)
NEW YORK, Oct 27 (Reuters) - Meritage Homes Corp (MTH.N) reported a third-quarter profit on Wednesday, surprising analysts who expected a loss, but orders fell as builders of new homes struggled to find customers in a sluggish economy.
Meritage expects to around break even for the fourth quarter, and be profitable for the year, Chief Executive Officer Steven Hilton said in a statement
Meritage reported a third-quarter profit of $1.2 million, or 4 cents per share, compared with a loss of $17.8 million, or 56 cents per share, a year ago.
Analysts had forecast a loss of 7 cents per share, according to Thomson Reuters I/B/E/S.
Meritage's orders fell 36 percent in the third quarter compared with a year ago, but its average price rose 20.7 percent to $275,700. The company said that reflected shifts in the mix of sales rather than price appreciation.
Meritage said California and Florida made up a greater percentage of 2010 closings than in the prior year, with a smaller percentage in Texas, where home prices are generally lower.
"We thought we'd bottomed out in 2009," Hilton told Reuters in an interview. "We thought we'd bottomed again this past summer. I don't think prices have gone down in a meaningful way but things haven't really improved. They're worse this year than they were last year."
Hilton said he noticed a slight uptick in sales in October over September, but also said it was "nothing to get excited about and not enough to think it's a trend."
He said Meritage's third quarter benefited from some success selling very specific products: energy efficient houses that include such features as solar heating systems and homes on prime suburban land close to nearby cities like Orlando, Florida that Meritage bought during the downturn.
But even some of the company's energy-efficient products have been a disappointment.
"In some cases, it hasn't been the elixir we've been looking for," Hilton said.
Meritage took $800,000 in pretax charges for land writedowns. Ryland took $16.7 million in such charges.
Hilton said in a statement that the company is anticipating lower closing revenue in the fourth quarter, given the company's lower sales levels in the last couple of quarters and lack of visibility.
"It will be challenging to maintain our profitability for the quarter with lower revenues, but we expect to be around break-even and to meet our goal of being profitable for the full year," he said.
Rival Ryland Group Inc (RYL.N) reported a 37 percent decline in orders and a net loss of 68 cents per share on Wednesday. It took $16.7 million in pretax charges for land writedowns.
"Housing market conditions were clearly challenging for (Ryland), but the quarterly loss was magnified by much larger-than-expected land-related charges," Barclays Capital credit analyst Vincent Foley wrote in a note to clients.
Meritage's shares, which closed up 1 cent on the New York Stock Exchange at $18.67, are off about 20 percent since late August, despite a rally in the broader market. Investors are concerned homebuilders will not be able to attract buyers in the absence of the federal home buyer tax credit.
Ryland's shares closed unchanged at $15.91 and are down 33 percent since late August. (Reporting by Helen Chernikoff; editing by Bernard Orr, Andre Grenon and Carol Bishopric)
- Anger mounts after bodies found trapped inside sunken South Korean ferry |
- Vice-principal of South Korea school in ferry disaster commits suicide |
- Special Report: How the U.S. made its Putin problem worse
- Israel space project gets $16 million boost from casino mogul Adelson
- All 338 Korean students, teachers rescued from sinking ferry - school official