A month has gone by since the last earnings report for Meritage Homes (MTH Quick QuoteMTH - Free Report) . Shares have lost about 8.6% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Meritage due for a breakout? 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 Q1 Earnings & Sales Miss Estimates, New Orders Down Y/Y

Meritage Homes reported weaker results for the first quarter of 2026, with adjusted earnings and total closing revenues missing the Zacks Consensus Estimate. Also, on a year-over-year basis, both metrics declined.

Meritage Homes reported weaker quarterly results as affordability pressures and heavier financing incentives weighed on profitability. Management said the quarter began with a severe winter storm that disrupted selling activity in several markets. As demand began to recover, consumer sentiment weakened again as geopolitical events pushed mortgage rates higher and lifted inflation concerns. 

In this environment, Meritage Homes leaned further into financing incentives to keep buyers engaged. The strategy helped drive a healthy flow of intra-quarter deliveries, but it also pressured profitability as incentives reduced price realization and limited operating leverage on a lower revenue base.

MTH’s Earnings & Revenue Discussion

Adjusted earnings were 82 cents per share, down 51.5% from $1.69 a year ago, and missed the Zacks Consensus Estimate of $1.01 by 18.8%.

Total revenues (including Total Closing revenues and Financial Services revenues) were $1.123 billion, down 17.7% year over year.

Segment Details of MTH’s Quarterly Release

Homebuilding: Total home closing revenues were $1.117 billion, down 17.7% from $1.358 billion in the prior-year quarter and missed the consensus call of $1.21 billion by about 7.6%.

Under the Homebuilding umbrella, home closing revenues declined 17.5% year over year to $1.108 billion, reflecting lower closing volume and a softer pricing environment. Land closing revenues totaled $9.4 million, down 39.3% from $15.4 million a year ago.

Financial Services: Segment revenues declined 11.3% year over year to $6.3 million.

Meritage Homes’ Closings Fell With Lower ASPs

Home closings totaled 2,967 units, down 13% from the year-ago period, reflecting the tougher selling environment and a more incentive-driven market. Home closing revenues declined 17% year over year to $1.1 billion, with the company pointing to both lower deliveries and pricing pressure.

Pricing also moved lower. Average sales price on closings slipped 5% year over year to $373,000, which management tied to increased incentive utilization and geographic mix, with a shift toward lower-ASP markets. Meritage Homes emphasized its “closing-ready” operating model, noting that nearly 70% of first-quarter deliveries came from intra-quarter orders, driving a backlog conversion rate of 254%.

MTH’s Orders Softened as Absorption Slowed

Total home orders fell 5.5% year over year to 3,664 units. In dollars, home order value declined 10.1% to $1.4 billion, as average absorption pace declined to 3.6 sales per month from 4.4 in the prior-year quarter. The company attributed the slower start to the spring season partly to a severe winter storm in January, followed by a broader confidence hit as geopolitical events pushed rates higher during the quarter.

Even with softer absorption, Meritage Homes grew its footprint. Ending community count rose 19% year over year to a company record 345 communities, and management expects full-year community count to increase 5%-10%, positioning the company to drive volume more through store growth than higher per-community absorptions in the near term.

Quarter-end backlog totaled 1,865 units, down 6.9% from the year-ago quarter. Backlog value decreased 12.4% year over year to $711.5 million.

MTH’s Margins Compressed Despite Direct Cost Savings

Home closing gross margin contracted 450 basis points year over year to 17.5%. Management cited greater incentive utilization, higher lot costs and reduced leverage on lower revenue as key drivers, partially offset by improved direct costs, lower compensation expense and faster cycle times. Adjusted home closing gross margin was 17.8%, down 430 bps year over year.

SG&A as a percentage of home closing revenues increased 50 basis points to 11.8%, reflecting lost leverage and higher technology costs.

Meritage Homes’ Capital Returns Stayed Aggressive

Meritage Homes ended the quarter with $767 million in cash and cash equivalents, down from $775 million at year-end 2025. The company’s debt-to-capital stood at 26.6%, while net debt-to-capital was 17.4%. Management said it remained focused on balance sheet preservation in an uncertain macro backdrop while staying disciplined on land investment timing.

Shareholder returns were a prominent feature of the quarter. The company repurchased $130 million of stock and paid $32 million in dividends, and the quarterly dividend was raised 12% year over year to 48 cents per share. Meritage Homes also reported $384 million remaining under its repurchase authorization as of March 31, 2026.

MTH’s Guidance Reset Reflects Cautious Demand View

Based on current market conditions, Meritage Homes updated its outlook for full-year 2026 home closing volume and revenues to be at or within 5% of full-year 2025 results. For the second quarter, the company guided to home closings of 3,650–3,900 units (down from 4,170 units reported in the prior-year quarter) and revenues of $1.37–$1.47 billion (down from $1.62 billion reported in the prior-year quarter).

Profitability guidance suggested modest near-term stabilization. Management expects home closing gross margin of around 18% (down from 21.1% reported in the prior-year quarter) and diluted EPS in the range of $1.18–$1.46 (down from $2.04 reported in the prior-year quarter). Executives reiterated that capturing demand in the current environment requires elevated incentives, while longer-term margin targets remain tied to normalized rates and improved operating leverage.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted -14.21% due to these changes.

VGM Scores

At this time, Meritage has a subpar Growth Score of D, a score with the same score on the momentum front. Charting a somewhat similar path, the stock has a score of C on the value side, putting it in the middle 20% 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.