Meritage Homes Predicts Profitable 2010

With $347 million in cash on hand, Meritage Homes is on a shopping spree, replenishing its low land inventory with lots priced low enough to help the company meet its goal of turning profitable in 2010. The Scottsdale, Ariz.-based company spent $50 million on bargain-basement lots in the third quarter, picking up a turnkey active adult community in Maricopa, Ariz., as well as land in Florida and California, executives told analysts during its third-quarter earnings call Tuesday. In total, the company contracted for 2,500 lots in 11 communities in five states. The new land will allow the company to open nine new communities in Phoenix in late 2009 through early 2010, as well as five in Orlando and 10 in California. Resetting its offerings with lower cost land is one strategy that has already helped the company narrow losses to $18 million for the quarter, 56 cents a share. Retooling product to cut costs by 30% to 40% in some markets; targeting what CEO Steve Hilton calls the market “sweet spot” of first-time and first-move-up buyers; and speeding up cycle times dramatically are other methods that have led to gross margins climbing to 14.5%. Hilton said that number will move up more as the lower-cost land moves through the process.

Click here to view this article from its source.