Why Is Meritage (MTH) Up 7.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Meritage Homes (MTH). Shares have added about 7.8% in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Meritage due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important catalysts.

Meritage Homes Q4 Earnings Top, Revenues Miss, New Orders Down Y/Y

Meritage Homes reported mixed results for the fourth quarter of 2025, with adjusted earnings beating the Zacks Consensus Estimate while the total closing revenues missed the same. On a year-over-year basis, both metrics declined.

The quarterly performance continued to be affected by elevated mortgage rates, persistent affordability challenges and the company’s increased use of financing incentives to stimulate demand. Higher lot costs and pricing adjustments to drive sales volumes also weighed on margins despite stable order trends.

MTH’s Earnings & Revenue Discussion

Adjusted earnings per share (EPS) of $1.67 topped the Zacks Consensus Estimate of $1.55 by 7.7%. However, the metrics declined 30.1% year over year from adjusted EPS of $2.39.

Total revenues (including Total Closing revenues and Financial Services revenues) amounted to $1.436 billion, down from $1.622 billion reported in the year-ago period.

Segment Details of MTH’s Quarterly Release

Homebuilding: Total closing revenues were $1.428 billion, which declined 12% from the prior-year quarter’s level and missed the consensus mark of $1.505 billion by 5.2%.

Under the Homebuilding umbrella, home closing revenues of $1.406 billion declined 12% from the prior-year quarter’s level due to lower average selling prices (ASPs) and reduced closing volumes. Land closing revenues were $21.1 million during the quarter, sharply up 21% year over year.

Meritage Homes reported 3,755 units of homes closed, down from 4,044 units reported in the year-ago quarter. The ASP of homes closing declined 5% from a year ago to $375,000, which was primarily impacted by higher utilization of financing incentives this year.

Total home orders declined 2% from the prior year to 3,224 units. In dollars, home orders decreased 9% year over year to $1.206 billion. The average absorption pace was 3.2 per month in the quarter.

The quarter-end backlog totaled 1,168 units, down 24% year over year. The value of the backlog decreased 30% year over year to $440.6 million.

Home closing gross margin contracted 670 basis points (bps) to 16.5%. The primary causes of the margin contraction were non-recurring charges, greater utilization of incentives, higher lot costs and reduced leverage of fixed costs on lower home closing revenues. Adjusted home closing gross margin was 19.3%, down 400 bps year over year.

SG&A expenses, as a percentage of home closing revenues, were 10.6% compared with 10.8% in the prior-year quarter. The decrease was attributed to lower performance-based compensation, which was partially offset by reduced leverage on lower home closing revenues as well as higher external commission rates and technology costs.

Financial Services: The segment’s revenues declined 2% from the prior-year quarter’s level to $8.2 million.

Balance Sheet and Shareholder Returns

Meritage Homes ended 2025 with $775.2 million in cash and equivalents, up from $651.6 million at year-end 2024. The company’s debt-to-capital ratio stood at 26%, while net debt-to-capital was 16.9%.

During 2025, the company repurchased 4,289,984 shares for $295 million and paid $121 million in dividends. As of Dec. 31, 2025, $514 million remained available to repurchase under the program.

MTH’s 2026 Guidance

Meritage Homes expects home closing volume and revenue to be consistent with full-year 2025 results.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -19.34% due to these changes.

VGM Scores

At this time, Meritage has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a score of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Meritage has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.