What's happening:Top-10 U.S. homebuilderMeritage Homes Corporation stock fell more than 12% early in trading today, before picking back up a little bit of those losses. As of this writing, shares are still down 10.5%.
Why it's happening:Meritage updated its quarterly and full-year earnings guidance after market hours yesterday afternoon, lowering estimates. Management had previously announced guidance of between $3.60 and $3.90 earnings per share for the full year, but reduced it to $3.30-$3.75 EPS, and indicated it expected the current quarter -- Q3 -- earnings per share to come in between $0.70 and $0.85, versus last year's $0.79 EPS. The company earned $3.46 per share last year, so it's possible full-year earnings may decline from 2014 levels.
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It does look like the news isn't necessarily as "bad" as it sounds, as management is pointing at two things being primary drivers behind the shortfall: First, delays in Texas and Colorado after really harsh spring weather, especially flooding in Texas that put that market way behind. Second, the company says it's facing a serious shortfall in skilled construction labor.
This second concern is a bit of a "high-class" problem, since it's being driven by increased demand for new homes. The company said labor costs are going to be a bit higher, because there are too few skilled workers in many markets with the strongest demand.
In other words, if we can take management at its word, this is a short-term problem. As CEO Steve Hilton said in the release, high demand for skilled labor is a sign of a recovering homebuilding market. That's probably good news for the longer term.
The article Here's Why Meritage Homes Corp Stock Fell 10% Today originally appeared on Fool.com.
Jason Hall owns shares of Meritage Homes. The Motley Fool recommends Meritage Homes. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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