Meritage Homes concluded its 2025 fiscal year with a mixed performance, setting a tone of caution for the period ahead. The homebuilder surpassed earnings expectations but fell short on revenue, prompting management to outline a defensive strategy for navigating evolving market conditions in 2026.
Capital Allocation and Strategic Priorities
Despite a conservative near-term outlook, the company remains committed to its capital return program. For 2026, Meritage Homes has authorized $400 million in share repurchases, which it intends to execute in consistent quarterly increments of $100 million. Concurrently, the firm plans to allocate up to $2 billion for land acquisition and development. This investment is aimed at expanding its active selling community count by 5% to 10%, positioning the business for future growth when the market cycle turns.
A Quarter of Contrasting Results
The fourth quarter of 2025 highlighted this divergence clearly. Earnings per share came in at $1.67, exceeding consensus estimates from market analysts. However, revenue from home closings, at $1.44 billion, did not meet projected forecasts. This outcome was largely attributed to operational efficiencies that helped cushion the impact of softer sales.
Significant improvements in build times, which were reduced to under 110 calendar days, contributed to profitability. Furthermore, a robust conversion rate of 221% on the company’s order backlog provided substantial support. These process optimizations were instrumental in delivering EPS above market expectations, even as revenues remained below the $1.44 billion mark.
Should investors sell immediately? Or is it worth buying Meritage Homes?
Conservative Guidance for the Year Ahead
Management’s forecast for the full 2026 year signals a period of consolidation rather than aggressive expansion. Deliveries and revenue are expected to remain largely flat compared to the prior year’s levels.
This cautious approach is reflected in the first-quarter guidance. For Q1 2026, Meritage anticipates selling between 3,000 and 3,300 homes. The resulting revenue is projected to be in the range of $1.13 billion to $1.24 billion. The company expects a gross margin between 18% and 19%, with earnings per share forecasted between $0.87 and $1.13. This represents a slight downward revision compared to prior internal estimates for the quarter.
Navigating a Challenging Housing Landscape
The broader U.S. housing market continues to present headwinds. Although mortgage interest rates have shown some recent moderation, persistently high construction costs and ongoing labor shortages continue to pressure the industry. In response to affordability constraints for potential buyers, Meritage Homes is employing incentives such as mortgage rate buydowns. The effectiveness of these measures in stimulating demand, particularly with home prices holding steady, will be closely watched in the coming months through monthly sales data.
Ad
Meritage Homes Stock: Buy or Sell?! New Meritage Homes Analysis from February 1 delivers the answer:
The latest Meritage Homes figures speak for themselves: Urgent action needed for Meritage Homes investors. Is it worth buying or should you sell? Find out what to do now in the current free analysis from February 1.
Meritage Homes: Buy or sell? Read more here...
