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Meritage Homes Corporation - Residential Home Builder

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2008-01-31

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stories: yahoo.com, fool.com, cnn.com, forbes.com, forbes.com

At it's height Meritage Homes was the the nation's 12th-largest builder. The company's stock traded as high as $112 in July of 2005, the height of the housing boom before splitting 2:1 (Fool).

As with other builders the fall from grace has been dramatic and sudden. A glance at their chart shows the steep steady crash from precipice at $95 to $10.

Meritage released their fourth quarter earnings for 2007 on January 28th. Per their release:

Sales orders fell 13 percent to 1,048 units [for the quarter], while sales order value fell 23 percent to $271,617.

The recent quarter's loss included pretax charges of $130 million for real estate-related and joint venture valuation adjustments, $58 million for goodwill write-offs, $11 million for the acceleration of expenses related to the cancellation of employee stock options and $3 million for impairment of golf course assets held for sale.

In comparison, 2006 period included a pretax charge of $63 million related to real estate-related valuation adjustments.

For the full year 2007, Meritage posted a loss of $288.9 million, or $11.01 per share, compared with a profit of $225.4 million, or $8.32 per share, in 2006. Total closing revenue fell to $2.34 billion from $3.46 billion the year before.

In November 2007, S&P cut the outlook on Meritage from stable to negative. More recently (Jan 17) Moody's lowered the ratings on Meritage's debt from Ba3 to B1, keeping Meritage on negative outlook.

Meritage traded as low as $7.04 per share before closing Jan. 24 at $10.87.

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Important: Ailing Builders haven't shut down, but they've suffered significant valuation declines, temporarily halted redemptions, or faced other major business hurdles. Builders on watch may not even have unusual declines relative to peers, but may be posted if it is felt there may be risk of developing a more serious condition in the near future.