SCOTTSDALE, AZ -- Meritage Homes Corporation announced net earnings of $32.6 million for the third quarter, down from $38.2 million in the third quarter of 2013, primarily due to lower home closing gross margin, lower land closing gross profit and higher selling, general and administrative costs.
Home closing revenue increased 13% over the prior year, combining a 7% increase in home closings and a 5% increase in the average price of homes closed during the quarter. Respective increases of 31% and 53% in home closing revenue from the Central and East regions more than offset an 11% decline from the West region, which resulted from decreases of 15% and 19% in California and Arizona, respectively, partially offset by a 16% increase in Colorado.
Total order value grew 21% to $573.6 million in the third quarter of 2014 from $473.9 million in 2013, reflecting a 15% increase in homes ordered and a 5% increase in the average selling price. The order value increase came primarily from Colorado, Texas and the expanded East Region, including the newly acquired Legendary Communities, with Arizona being the only negative comparison to the prior year.
"We were pleased to achieve year-over-year growth in closing volumes, orders and backlog, with even greater expansion in our home closing revenue, order value and backlog value as a result of higher average selling prices compared to last year," said Steven J. Hilton, chairman and chief executive officer of Meritage Homes. "Home closing revenue growth of 31% and 53% in our Central and East regions, respectively, more than offset the year-over-year declines in Arizona and California, where sales have slowed from 2013 and home prices are no longer outpacing the increased cost of land, reducing our gross margins in those states.
"The combined effects of revenue and margin declines in Arizona and California pulled our overall home closing gross margin and net earnings down in the third quarter of 2014 compared to last year's third quarter, when we reported the highest quarterly earnings per share we had generated in the last five years," explained Mr. Hilton. "Our home closing margin was also reduced by the short-term effects of purchase accounting associated with home closings from our acquisition of Legendary Communities in August. However, our home closing gross margin of 21.6% for the first three quarters of 2014 was in line with 21.5% for the first three quarters of 2013.
"More importantly for the longer term, our divisions did an excellent job of getting new communities opened, exceeding our projected target of 190 communities within existing markets before adding those from Legendary, which brought our total actively selling communities to 225 as of September 30, 2014. We are enthusiastic about the opportunities for continued growth represented by those additional communities.
"As the U.S. housing market continues to improve overall, we are confident in our ability to leverage our strengths and the Meritage Homes brand to further develop our existing markets and penetrate additional markets where we see promising opportunities," Mr. Hilton continued. "We remain committed to our plan to generate strong revenue and earnings growth in 2015 and beyond. We currently project fourth quarter home closing revenue of $700-725 million and diluted earnings per share of $1.00-1.05."