SCOTTSDALE, AZ -- Meritage Homes Corporation, a leading U.S. homebuilder, announced net earnings of $49.2 million for the fourth quarter of 2014, compared to prior year net earnings of $46.1 million, primarily reflecting lower home closing margins on higher home closing revenues and a lower effective tax rate. Earnings per share also reflected a larger share count in 2014 compared to 2013.
Home closing revenue increased 29% due to a 27% increase in home closings combined with a 2% increase in average price over the prior year period. The Central region (Texas) grew home closing revenue by 53% over 2013, followed by the East region's 40% increase (Florida, the Carolinas and Tennessee), and an 8% increase in the West region (California, Colorado and Arizona).
Fourth quarter orders increased 12% and the total value of homes ordered increased 18%, after a 5% increase in average sales prices, which reached $386,000 in the fourth quarter of 2014 compared to $367,000 in 2013. Texas's fourth quarter order value was flat compared to the prior year despite an 8% decline in orders, as it was offset by a 9% increase in its average sales price. The decline in Texas orders was due to 13% fewer average actively selling communities compared to prior year, partially offset by an increase in average sales per community.
"We were pleased with our results for the fourth quarter and full year 2014," said Steven J. Hilton, chairman and chief executive officer of Meritage Homes. "We achieved strong growth in closing volumes, orders and backlog for both the quarter and the year, driven by expansion of our East region and favorable market conditions in key markets like Texas and Colorado. With the combination of higher average prices on top of those volume gains, we generated even greater increases in our fourth quarter and full year home closing revenue, total order value and backlog value.
"Our net earnings increased by 7% in the fourth quarter over 2013, and were up 14% for the year," said Mr. Hilton. "In addition to revenue growth, our net earnings reflected a lower tax rate for the quarter due to federal energy tax credits we earn for building highly energy efficient homes using advanced building standards. Over the last several years, those credits have significantly reduced our effective tax rates well below the statutory rates, translating to a real benefit for our shareholders in addition to the energy savings for our homeowners.
"Higher home closing revenue more than offset our expected margin decline, resulting in a 13% increase in home closing gross profit for the fourth quarter and 16% for the full year 2014. Because we are no longer benefiting from rapid home price inflation that exceeds our cost increases as it did through the middle of 2013, our gross margins have trended back to more normalized ratios from the unusually high levels in 2013 -- especially in California and Arizona. Purchase accounting adjustments on home closings from our August 2014 acquisition of Legendary Communities represent a temporary drag on our margins," Mr. Hilton explained.
"We have maintained a strong balance sheet by carefully managing our debt and risks while investing where we perceive the best opportunities exist. We believe Meritage is strategically positioned in many of the highest quality markets in the country, which we selected based on their short- and long-term growth potential, population demographics and anticipated profitability through the business cycle. That strategy has enabled us to produce strong returns for our shareholders over the long term. We will continue to look for expansion and growth opportunities in new markets that meet these same criteria."
He continued, "While there is uncertainty surrounding the potential effects of lower oil prices on the energy industry and some housing markets like Houston, other industries and markets should benefit from lower energy prices. We are confident in our market position and believe there will be opportunities as the U.S. economy continues to grow despite a decline in a single industry. Interest rates remain at historically low levels, employment numbers have improved and recent changes in the mortgage industry should open the door for hundreds of thousands of additional buyers who have previously been unable to obtain financing.