10 Small-Cap Stocks Jim Cramer is Talking About Amid Latest Market Rotation

4. Meritage Homes Corp (NYSE:MTH)

Number of Hedge Fund Investors: 28

Jim Cramer mentioned home construction company Meritage Homes Corp (NYSE:MTH) during his program on CNBC. He highlighted that the stock sells 9x earnings. However, he said that the stock has “moved too much” and he prefers Toll Brothers.

Meritage Homes Corp (NYSE:MTH) recently reported strong Q2 numbers. Orders of 3,799 homes for the second quarter of 2024 were 14% higher year over year.  The company also upped its full-year guidance. Here is what management said during the latest earnings call:

Given current market conditions, we have revised our full year projections higher to the following: total closings between 14,750 and 15,500 units; home closing revenue of $6.1 billion to $6.3 billion; home closing gross margin around 24.5% to 25%; and effective tax rate of about 22.5%; and diluted EPS in the range of $19.80 to $21 flat.

As for Q3 2024, we are projecting total closings between 3,650 to 3,850 units; home closing revenue of $1.5 billion to $1.6 billion; home closing gross margin of 23.5% to 24%; and an effective tax rate of about 22.5%; and diluted EPS in the range of $4.60 to $5.05. Both Q3 and full year guidance assume current market conditions and interest rates.

Meritage Homes Corp (NYSE:MTH)  bulls believe the company’s margin outlook can improve amid easier comparisons, operating leverage, and lower commodity costs. The upcoming interest rate cuts could be a major booster for the stock.

Lumber prices are at record lows and are expected to remain depressed. These factors combined should positively impact Meritage Homes Corp (NYSE:MTH)  in the upcoming quarters.