Meritage Homes Q3 2026 Earnings Fall 32% as Margins Narrow

Meritage Homes Corp. (NYSE: MTH) reported lower third-quarter 2026 earnings as weaker home closings, a reduced average selling price and margin pressure outweighed growth in its community count. Net earnings fell 32% year over year to $68 million, while diluted earnings per share declined 25% to $1.04.

Home closing revenue decreased 17% to $1.16 billion. The company delivered 3,187 homes during the quarter, down 14%, and its average closing price declined 4% to $365,000. Meritage attributed the lower average price to higher incentives and geographic mix.

Home closing gross profit fell 24% to $203 million, with gross margin contracting 170 basis points to 17.4%. Adjusted home closing gross margin was 17.9%, down from 20.1% a year earlier. Meritage said higher lot and incentive costs and lower operating leverage weighed on profitability, partially offset by direct cost savings and lower performance-based compensation.

Selling, general and administrative expenses declined 16% to $128 million, but rose to 11.0% of home closing revenue from 10.8% because of lower leverage and higher technology costs. Reduced discretionary spending and performance-based compensation provided a partial offset.

Adjusted diluted EPS was $1.11, down 28%. The adjusted result excluded $6 million of real estate inventory impairments and charges related to terminated land deals, compared with $14.5 million a year earlier. Earnings before taxes fell 34% to $85 million, while the effective tax rate declined to 20.1% from 22.6%, reflecting acquired below-market transferable clean-fuel production tax credits.

For the first nine months of 2026, home closing revenue declined 16% to $3.66 billion and net earnings dropped 42% to $214 million. Adjusted diluted EPS fell 37% to $3.38.

Orders decline as community count expands

Meritage generated 3,083 net orders in the quarter, 15% fewer than a year earlier, as average monthly absorption declined 21% to 3.0 homes per community. The average selling price on orders was $383,000, down 2%, leaving total order value 17% below the prior-year period.

The company said its realtor engagement helped it maintain the 3.0 monthly sales pace despite difficult housing conditions. Average community count increased 7% to 344, while ending community count rose 4% to 348. Backlog conversion was 186%, and more than 55% of quarterly deliveries came from orders placed during the same quarter.

Orders declined across all three homebuilding regions. The West recorded 706 orders, down 19%, with monthly absorption of 2.6 homes. Central orders fell 12% to 1,132, although the region posted the company’s highest absorption rate at 3.7 homes per month. East orders decreased 16% to 1,245, with absorption of 2.7 homes. Average community counts increased in each region.

Starts moderated sequentially

Meritage started 3,442 homes during the quarter, up 12% year over year but down 12% from the second quarter as it aligned construction activity with the sales pace. The company ended September with 5,454 speculative homes and 1,611 homes in backlog.

Average speculative inventory was 15.7 homes per community, representing about five months of supply. That remained within management’s target range of four to six months. Meritage said the modest sequential increase reflected its decision to moderate sales to preserve margin.

Land acquisition and development spending totaled $329 million, down from $528 million a year earlier. The company controlled 71,765 lots at quarter-end, compared with 80,836 a year earlier, while its lot supply remained at 5.3 years. Owned lots accounted for 69% of the total, with optioned lots representing the remaining 31%. Management described the lower investment as an intentional pullback to align spending with market conditions.

Liquidity remains a capital-allocation priority

Meritage returned $86 million to shareholders during the third quarter through share repurchases and dividends, equal to 127% of quarterly earnings. For the first nine months of 2026, shareholder returns totaled $379 million, including $285 million of buybacks and $94 million of cash dividends.

At Sept. 30, the company had $677 million in cash and cash equivalents and $1.85 billion of notes payable and other borrowings. Debt-to-capital was 26.9%, compared with 26.0% at the end of 2025, while net debt-to-capital increased to 18.9% from 16.9%. Book value per share rose to $78.30 from $76.22.

Management said it plans to remain disciplined on capital allocation, preserving liquidity and financial flexibility while balancing investment for future growth with shareholder returns. Meritage continues to focus on entry-level and first move-up homes, supported by a speculative-home strategy, move-in-ready inventory and realtor relationships.

The company identified the uncertain housing environment as a key constraint. Risks cited in the presentation included higher interest rates, reduced mortgage availability, the cost of rate locks and buy-downs, elevated material and labor expenses, tariffs, cancellations, slow absorption, inventory impairments and the availability and cost of land and finished lots. Meritage also noted that its results may be affected by competition, limited geographic diversification, severe weather, financing conditions and supply-chain or labor disruptions.