Why Is Meritage (MTH) Up 10.2% Since Last Earnings Report?

It has been about a month since the last earnings report for Meritage Homes (MTH). Shares have added about 10.2% in that time frame, outperforming the S&P 500.

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 its most recent earnings report in order to get a better handle on the important catalysts.

Meritage Homes Q3 Earnings Miss Estimates, Revenues Fall Y/Y

Meritage Homes reported weaker-than-expected results for the third quarter of 2025, with earnings and total closing revenues missing the Zacks Consensus Estimate and declining year over year.

The quarterly performance of the company was hindered by the ongoing housing market challenges due to a still-high mortgage rate and inflationary pressures, which are directly hitting homebuyers. Also, increased use of financing incentives and higher lot costs were added headwinds to the margins amid lower top-line growth.

MTH’s Earnings & Revenue Discussion

Earnings per share (EPS) of $1.39 fell 18.7% short of the Zacks Consensus Estimate of $1.71, and declined 48% year over year from $2.67.

Total revenues (including Total Closing revenues and Financial Services revenues) amounted to $1.424 billion, down from $1.597 billion reported in the year-ago period.

Segment Details of MTH’s Quarterly Release

Total Closing Revenues: Total closing revenues were $1.42 billion, which declined 11% from the prior-year quarter’s level and missed the consensus mark of $1.52 billion by 6.6%.

Under the Homebuilding umbrella, home closing revenues of $1.40 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 $16.1 million during the quarter, sharply up from $2.7 million a year ago.

Meritage Homes reported 3,685 units of homes closed, down 7% from the year-ago quarter. The ASP of homes closing declined 5% from a year ago to $380,000, which was primarily impacted by higher utilization of financing incentives this year.

Total home orders increased 4% from the prior year to 3,636 units. In dollars, home orders decreased 1% year-over-year to $1.42 billion. The average absorption pace was 3.8 per month in the quarter.

The quarter-end backlog totaled 1,699 units, down 26% year over year. The value of the backlog decreased 28% year over year to $670.0 million.

Home closing gross margin contracted 570 basis points (bps) to 19.1%. The primary causes of the margin contraction were greater utilization of buyer incentives, higher lot costs, real estate impairments, and terminated land deal charges. Excluding these charges, the adjusted home closing gross margin was 20.1%, down 480 bps year over year.

SG&A expenses, as a percentage of home closing revenues, were 10.8% compared with 9.9% in the prior-year quarter. This rise was mainly caused by reduced leverage on lower home-closing revenue, alongside higher commission and technology costs, partially offset by lower compensation expenses.

Financial Services: The segment’s revenues rose 5% from the prior-year quarter’s level to $8.46 million.

Balance Sheet and Shareholder Returns

Meritage Homes ended the quarter with $729 million in cash and equivalents, up from $652 million at year-end 2024. Total liquidity remained robust with no borrowings under its revolver. The company’s debt-to-capital ratio stood at 25.7%, while net debt-to-capital rose to 17.2% from 11.7%.

During the quarter, the company returned $85 million to shareholders, including $55 million in share repurchases (772,000 shares) and $30 million in dividends. Year-to-date, buybacks and dividends totaled $237 million, representing 64% of earnings.

MTH’s Q4 2025 Guidance

The company expects home closings between 3,800 and 4,000 homes, up from 3,304 closings in the year-ago quarter.

Home closing revenues are projected to be between $1.46 billion and $1.54 billion, down from $1.60 billion reported a year ago. Home closing gross margin is expected to be between19-20%, down from 23.2% reported in the year-ago quarter.

EPS is expected to be between $1.51 and $1.70, down from $2.36 reported a year ago.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted -12.57% due to these changes.

VGM Scores

At this time, Meritage has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock has a grade of C on the value side, putting it in the middle 20% for value investors.

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 #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Meritage belongs to the Zacks Building Products - Home Builders industry. Another stock from the same industry, PulteGroup (PHM), has gained 7.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2025.

PulteGroup reported revenues of $4.4 billion in the last reported quarter, representing a year-over-year change of -1.6%. EPS of $2.96 for the same period compares with $3.35 a year ago.

For the current quarter, PulteGroup is expected to post earnings of $2.80 per share, indicating a change of -20% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.9% over the last 30 days.

PulteGroup has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.

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This article originally published on Zacks Investment Research (zacks.com).

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