Meritage Homes reported Q1 2026 revenue of $1.123 billion, net income of $55.3 million and diluted earnings per share (EPS) of $0.82, reflecting a softer start to the spring selling season amid macro headwinds. Backlog conversion remained robust at 254% and the company ended the quarter with a record 345 active communities, up 19% year over year and 3% sequentially, supported by the addition of 40 new communities. Management traced the margin decline to higher incentives, land costs, and mix shifts, while underscoring substantial operating leverage from a higher store count and faster cycle times as volumes recover. The firm reaffirmed its strategic framework: leveraging a 60-day closing guarantee, move-in-ready inventory, and strong realtor engagement to sustain demand, while balancing growth with capital allocation through share buybacks and an above-market dividend.
Looking ahead, Meritage guided for Q2 2026 closings of 3,650–3,900 and home closing revenue of $1.37–$1.47 billion with ~18% gross margin and a diluted EPS range of $1.18–$1.46. For the full year, the company expects closings to be within 5% of 2025 results and 5–10% community count growth, supported by land spend up to $2 billion in 2026. Management reiterated a long-term gross margin target of 22.5%–23.5% at normalized demand, with incremental improvements expected from higher absorption, lower incentives over time, and ongoing cost reductions. The balance sheet remained healthy, with cash of $767 million and net debt to cap of 17.4%, and the company maintained a programmatic buyback plan of roughly $100 million per quarter for 2026. The combination of a higher community count, disciplined land management (including off-balance sheet options), and a path toward margin recovery provides a constructive but conditional investment thesis contingent on macro stabilization and a measurable improvement in housing demand.