Meritage Homes’ third quarter was shaped by persistent affordability concerns and declining consumer confidence, which management said led to softer-than-expected demand across many markets. CEO Phillippe Lord pointed to the company’s emphasis on move-in ready homes and a 60-day closing-ready guarantee as key tactics to maintain sales momentum, but acknowledged that increased use of incentives was necessary to support absorption rates. CFO Hilla Sferruzza noted that the broader incentive environment and higher land and lot costs drove margin compression, with the company opting not to sacrifice long-term land values for short-term sales gains.
Is now the time to buy MTH? Find out in our full research report (it’s free for active Edge members).
Meritage Homes (MTH) Q3 CY2025 Highlights:
- Revenue: $1.42 billion vs analyst estimates of $1.47 billion (10.8% year-on-year decline, 3.4% miss)
- EPS (GAAP): $1.39 vs analyst expectations of $1.63 (14.3% miss)
- Adjusted EBITDA: $133.9 million vs analyst estimates of $164.5 million (9.4% margin, 18.6% miss)
- Revenue Guidance for Q4 CY2025 is $1.5 billion at the midpoint, below analyst estimates of $1.55 billion
- EPS (GAAP) guidance for Q4 CY2025 is $1.61 at the midpoint, missing analyst estimates by 9.3%
- Operating Margin: 8.4%, down from 15% in the same quarter last year
- Backlog: $670 million at quarter end, down 28.1% year on year
- Market Capitalization: $4.63 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Meritage Homes’s Q3 Earnings Call
- Alan Ratner (Zelman): Asked if inventory turnover and cash generation could rebound as spec inventory levels normalize; CEO Phillippe Lord said optimization opportunities exist, especially by reducing spec supply and improving land efficiency in 2026.
- Trevor Allinson (Wolfe Research): Questioned whether Meritage would further lower spec home inventory near-term and how starts would trend; Lord explained the goal is to bring spec count down and align starts with sales as community count grows.
- Stephen Kim (Evercore ISI): Inquired if margins for new communities would improve over the project lifecycle; Lord replied that new communities will open at current margin levels, with limited upside expected until incentives moderate.
- Michael Rehaut (JPMorgan): Sought clarity on the drivers behind sequential margin declines and the outlook for share repurchase cadence; Sferruzza confirmed margin pressure was from clearing older specs and higher incentives, and projected higher ongoing buyback activity.
- Susan Maklari (Goldman Sachs): Asked about market share gains from the 60-day close strategy; Lord stated Meritage is capturing share from existing homes and some affordable builders due to certainty and move-in ready offerings.
Catalysts in Upcoming Quarters
In the quarters ahead, key indicators to watch include (1) whether incentive usage begins to taper as consumer sentiment stabilizes, (2) the pace and profitability of double-digit community count growth, and (3) improvements in cycle times and inventory turnover. Execution on cost controls and the ability to leverage operational scale amid ongoing margin pressures will also be crucial indicators of Meritage’s performance.
Meritage Homes currently trades at $65.77, down from $71.02 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).
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