Meritage Homes Corporation

What they do

Meritage builds single-family attached and detached homes in long-term high-growth U.S. markets under the Meritage Homes name, operating in three reporting regions: West, Central and East, spanning Arizona, California, Colorado, Utah, Tennessee, Texas, Alabama, Florida, Georgia, Mississippi, North Carolina and South Carolina. At December 31, 2025 it was actively selling in 336 communities with base prices from about $161,000 to $1,000,000. It also runs a financial services segment offering title and escrow through Carefree Title Agency, insurance through Meritage Insurance Agency, and mortgage services through an unconsolidated joint venture.

Revenue drivers

• West Region homebuilding — Second quarter 2026 home closing revenue of $400.8 million on 825 homes, an ASP of $485,800, the highest-priced of the three regions but down 27.0% year over year.
• Central Region homebuilding — Second quarter 2026 home closing revenue of $446.7 million on 1,308 homes at a $341,500 ASP, down 7.0% year over year.
• East Region homebuilding — Second quarter 2026 home closing revenue of $540.4 million on 1,592 homes at a $339,500 ASP, the largest region by revenue and down 7.8% year over year.
• Financial services — Title and escrow, mortgage and insurance services sold to Meritage homebuyers, including wholly-owned Carefree Title and Meritage Insurance; the 10-K identifies it as a separate reporting segment but the excerpts do not disclose its revenue.

Recent performance

Second quarter 2026 home closing revenue fell 14% year over year to $1.388 billion on 3,725 closings, down 11%, with ASP on closings down 4% to $373,000. Home orders fell 9% to 3,575 units and order value fell 11% to $1.376 billion; the company attributed the order decline to a 19% lower average absorption pace, partly offset by a 14% higher average community count. Home closing gross margin was 18.3% versus 21.1% a year earlier, a 280 basis point decline, and net earnings fell 38% to $90.6 million with diluted EPS of $1.37. For the first half of 2026, revenue fell 16% to $2.496 billion, net earnings fell 46% to $145.9 million, and diluted EPS fell 42% to $2.18. Ending backlog was 1,715 units worth $661.9 million, down 2% and 5% respectively.

Strategy

Management describes a disciplined capital allocation strategy balancing growth and shareholder returns while maintaining liquidity in a volatile interest rate environment, returning $131 million to shareholders in the second quarter of 2026 through repurchases and dividends. Land spend was moderated to $357 million in the quarter from $509 million a year earlier, but the company reiterated its prior expectation of 5-10% year-over-year community count growth for full year 2026. Operational focus is on available home inventory and improved cycle times, which produced a 200% backlog conversion rate in the second quarter with nearly 60% of closings generated from intra-quarter sales. The company ended the quarter with $807 million of cash, no borrowings under its revolving credit facility, and a net debt-to-capital ratio of 17.1%.

Risks

• Interest rate and mortgage availability — The 10-K states that housing demand is adversely affected by rising rates and limited mortgage availability, and that rapid rate increases can cause contract cancellations among backlog buyers who have not locked rates.
• Declining gross margin — Home closing gross margin fell 280 basis points year over year to 18.3% in the second quarter of 2026 on lost leverage from lower revenue and higher lot costs, only partly offset by direct cost savings and faster cycle times.
• Weakening demand and absorption — Second quarter 2026 orders fell 9% as average absorption pace dropped 19%, with management saying the spring selling season remained softer than expected amid macroeconomic uncertainty.
• Inventory impairments and land walk-aways — The second quarter of 2026 included $3.6 million of real estate inventory impairments and $0.3 million of terminated land deal walk-away charges, versus $4.2 million of walk-away charges and no impairments a year earlier.

Outlook

Management said the 2026 spring selling season remained softer than expected, with macroeconomic uncertainty and volatile interest rates continuing to pressure buyer psychology. It reiterated its prior expectation of 5-10% year-over-year community count growth for full year 2026. The company emphasized maintaining sufficient liquidity in a volatile rate environment, ending the second quarter with $807 million of cash and no revolver borrowings. No earnings or revenue guidance figures appear in the excerpts provided.