Taylor Morrison Home (TMHC -3.70%), a major U.S. homebuilder operating under several brand names, announced results for Q2 2025 on July 23, 2025. The company posted adjusted earnings per share (EPS) of $2.02, surpassing analyst estimates of $1.93 (non-GAAP). Revenue (GAAP) reached $2.03 billion, beating expectations of $1.93 billion (analyst estimate: $1,928.42 million). However, the results included a decline in home closings gross margin (GAAP) and a double-digit drop in new orders. While the quarter outperformed estimates, shrinking backlog and increased cancellations signaled a more cautious business environment ahead.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS – Diluted (Non-GAAP) | $2.02 | $1.93 | $1.97 | 2.5 % |
| Revenue (GAAP) | $2.03 billion | $1.93 billion | $1.99 billion | 2.0 % |
| Home Closings Gross Margin | 22.3 % | 23.8 % | (1.5 pp) | |
| SG&A as % of Home Closings Revenue | 9.3 % | 10.2 % | (0.9 pp) | |
| Net Sales Orders (units) | 2,733 | 3,111 | (12.2 %) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Key Success Factors
Taylor Morrison Home is one of the largest homebuilders in the U.S, focused on developing residential communities for entry-level, move-up, and resort lifestyle buyers. It operates through a mix of to-be-built homes and spec (already constructed) homes across key Sunbelt and coastal markets.
The recent focus has centered on disciplined land acquisition, operational efficiency, and diversification. The company's strategy combines direct home sales with financial offerings such as in-house mortgage, title, and homeowner’s insurance services. Taylor Morrison Home also operates a build-to-rent division, broadening its reach beyond individual home buyers. Success in these areas depends on managing development costs, keeping margins stable, and balancing inventory with real demand.
Second Quarter Highlights and Financial Developments
Adjusted EPS (non-GAAP) for Q2 2025 surpassed Wall Street’s expectations, coming in at $2.02 versus a $1.93 estimate. Revenue (GAAP) also exceeded projections, reaching $2.03 billion, but the pace of growth slowed compared to prior periods. Home closings increased to 3,340 units in Q2 2025, a 4% rise versus Q2 2024, but the average selling price declined by 1.8% to $589,000, particularly in the East and Central regions, where average prices declined over 6%.
Despite higher closings, profits faced pressure as home closings gross margin (GAAP) fell to 22.3% from 23.8% in Q2 2024. According to management, this margin compression was tied to a greater focus on selling spec homes—ready-to-move-in properties—which tend to carry lower profit margins than to-be-built houses. Incentives and competitive pricing played a bigger role this quarter, reflecting heightened competition, particularly for spec homes.
Sales trends weakened during the quarter. Net sales orders, a key forward-looking metric that tracks new contracts signed, fell 12% from the year-ago period to 2,733 units. The average monthly sales absorption per community dropped to 2.6, down from 3.0 last year. Active selling communities remained nearly flat at 345.
Order cancellations rose to 14.6% of gross orders, a significant increase from 9.4% in Q2 2024. This uptick in cancellations was especially notable given the industry focus on selling completed spec homes. The total backlog—homes under contract but not yet delivered—fell 29% to 4,461 units, with a 30% drop in backlog value to $2.94 billion.
Taylor Morrison Home’s financial services division contributed $52.9 million in revenue (GAAP), up 8% from Q2 2024. The business line includes mortgage lending, title insurance, and homeowner’s insurance. The mortgage “capture rate”—or share of buyers financing via the in-house subsidiary—dipped to 87%. The company maintained a high average borrower credit score of 751, and an average debt-to-income ratio of 40%.
Operationally, the company’s selling, general, and administrative (SG&A) costs improved. SG&A expenses dropped to 9.3% of home closings revenue from 10.2% in Q2 2024, Notably, the company repurchased 1.7 million shares at a cost of $100 million, as part of a plan to buy back $350 million or more in shares through 2025.
From a geographic perspective, the West region saw flat closing volume in Q2 2025 but benefitted from a 6.3% increase in average selling prices versus Q2 2024. In contrast, both the East and Central regions experienced higher closing numbers but at lower prices, highlighting how different market dynamics affect overall company performance. The company continues to stress the importance of land pipeline control, with ongoing investments keeping its land supply at 6.4 years based on trailing twelve-month home closings, while using off-balance sheet structures to add flexibility and manage risk.
The quarter also included a $6.9 million warranty charge. Management has not provided details on whether this represents an emerging issue or a normal fluctuation.
Looking Ahead: Guidance and Trends
Management provided guidance for Q3 2025, targeting home closings of between 3,200 to 3,300 units and an average selling price of about $600,000. Gross margin is expected to remain around 22% (GAAP), while active community count should stay steady at just over 340. For FY2025, Taylor Morrison Home is projecting total home closings between 13,000 and 13,500. The average selling price is forecast to decline slightly to the range of $595,000 to $600,000. Expected gross margins sit around 22.5% (GAAP), with adjusted numbers expected to be approximately 23%.
Management continues to emphasize a disciplined, patient approach as the U.S. housing market faces weaker new order trends and higher cancellations. The company maintains its focus on margin management, cost discipline, and repurchasing stock, projecting a land spend around $2.4 billion for the full year. With sales and backlog under pressure, observers will be monitoring whether sales absorption, order cancellations, and consumer demand stabilize in the quarters ahead.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
