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Meritage Homes Pulls Back on Disappointing Quarterly Showing

MTH confessed to a surprise fourth-quarter loss

by 1/31/2012 10:45:13 AM
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Meritage Homes Corporation (MTH - 24.94) said its fourth-quarter loss steepened to $11.8 million, or 36 cents per share, from its year-ago loss of $895,000, or 3 cents per share. However, revenue increased 15% to $246 million. MTH's results were weaker than expected, as Wall Street was looking for earnings of 3 cents per share on $249 million in sales. The Scottsdale, Ariz.-based company cites a write-down from the winding down of its Las Vegas operations for the loss.

Traders have reacted harshly to these results, pushing MTH down more than 8% in early trading. Nonetheless, the stock is still sitting on a 17.1% year-to-date gain, and has outperformed the broader S&P 500 Index (SPX) by over 43% during the past three months. Currently, the shares are testing footing in the $24-$25 region, which has served as support in 2012.

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Taking a look at the sentiment backdrop, we see that options traders appear to be optimistic toward MTH. During the past 10 days, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 6.26 calls for every put on the stock. This call-heavy ratio arrives in the 83rd percentile of its annual range, signaling that traders on these exchanges have purchased bullish bets over bearish at a faster clip than usual over the past couple of weeks.

But not everyone on Wall Street is a fan of MTH. Despite depleting by nearly 5% during the past month, short interest still comprises 10.3% of the security's available float. In fact, at MTH's typical pace of trading, it would take roughly six days for all these shorted shares to unwind.

Considering MTH's disappointing showing, a change of heart from options traders could pressure the homebuilder lower in the near term.

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