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Meritage (MTH) Soars 8.8%: Is Further Upside Left in the Stock?

Meritage Homes Corporation MTH shares rallied 8.8% in the last trading session to close at $72.04. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 18.9% loss over the past four weeks.

The uptrend in the stock can primarily be attributable to stellar second-quarter fiscal 2022 results of KB Home KBH. The company acknowledges the fact that rising rates and inflation are slowing sales in the housing market. Nonetheless, KB Home affirmed its 2022 guidance.

Meritage is expected to post quarterly earnings of $5.86 per share in its upcoming report, which represents a year-over-year change of +34.4%. Revenues are expected to be $1.42 billion, up 11.1% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Meritage, the consensus EPS estimate for the quarter has been revised marginally lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on MTH going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Meritage is part of the Zacks Building Products - Home Builders industry. Tri Pointe Homes (TPH), another stock in the same industry, closed the last trading session 5.5% higher at $16.56. TPH has returned -23.5% in the past month.

For Tri Pointe, the consensus EPS estimate for the upcoming report has changed +1.8% over the past month to $1.12. This represents a change of +12% from what the company reported a year ago. Tri Pointe currently has a Zacks Rank of #3 (Hold).

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