Key Highlights

  • Diluted EPS of USD 1.04 declined 25% from USD 1.39 and fell short of the USD 1.17 consensus estimate.
  • Total closing revenue of USD 1.17 billion fell 17% and missed the USD 1.29 billion consensus estimate on 3,187 closings.
  • Home closing gross margin of 17.4% compared with 19.1% a year earlier, or 17.9% excluding impairments and walk-away charges.
  • Land acquisition and development spending dropped to USD 329 million while USD 86 million went back to shareholders.

Meritage Homes Corporation (NYSE:MTH) reported third-quarter 2026 diluted earnings per share of USD 1.04, compared with USD 1.39 a year earlier and a consensus estimate of USD 1.17. Net earnings were USD 67.8 million, 32% lower than USD 99.3 million. Total closing revenue came to USD 1.17 billion, down 17% and below a consensus estimate of USD 1.29 billion.

The company closed 3,187 homes, 14% fewer than a year ago, at an average price of USD 365,000, which was 4% lower because of incentives, mortgage rate buy-downs and geographic mix. Orders declined 15% to 3,083 homes as absorption slowed 21%, though average community count grew 7%. Backlog ended at 1,611 homes worth USD 637.2 million, each 5% lower than a year earlier.

Margin Pressure and Capital Deployment

Gross margin on home closings was 17.4%, down 170 basis points, as higher lot and incentive costs and weaker leverage on lower revenue outweighed direct cost savings and lower performance-based pay. Excluding USD 6.0 million of net impairment and walk-away items, margin was 17.9% against 20.1%, and adjusted diluted EPS was USD 1.11 against USD 1.55. Selling, general and administrative costs equaled 11.0% of home closing revenue, up from 10.8%. The effective tax rate fell to 20.1% from 22.6%, helped by acquired clean fuel production tax credits.

Cash totaled USD 677 million, and the revolver was undrawn. Net debt-to-capital was 18.9%, up from 16.9% at year end. The company bought back 757,128 shares for USD 55 million and paid USD 31 million of dividends at USD 0.48 per share. Nine-month shareholder returns of nearly USD 380 million equal 177% of year-to-date earnings, and USD 229 million of repurchase authorization remains.

Affordability Backdrop and Management Stance

Executive chairman commentary described a homebuying market shaped by higher mortgage rates and macroeconomic and geopolitical uncertainty, with the company choosing to defend margins over sales pace. CEO Phillippe Lord said the quarter converted nearly 190% of backlog into closings across 348 communities, up 4% from a year earlier. Absorption averaged 3.0 net sales per month per community.

Management anticipates conditions to stay unpredictable for several quarters and named liquidity and cash preservation as priorities. Land spending fell from USD 528 million to USD 329 million, and lots owned or controlled declined to about 71,800 from roughly 80,800. The release contained no numerical guidance.

Key Readings Ahead

Four readings stand out. Orders of 3,083 homes and the 3.0 monthly absorption pace show demand. Backlog of 1,611 homes carries an average price of USD 396,000, against USD 383,000 on new orders. Margin sits at 17.4% reported and 17.9% adjusted, compared with 19.1% and 20.1% a year ago. Balance sheet items include a net debt-to-capital ratio of 18.9%, USD 677 million in cash, and USD 229 million of buyback capacity.