Meritage Homes (MTH -0.27%), a major U.S. builder focused on affordable, move-in-ready homes, reported earnings for Q2 2025 on July 23, 2025, covering results for the three months ended June 30, 2025. The company delivered GAAP earnings per share (EPS) of $2.04 and revenue of $1.62 billion, both ahead of analyst estimates of $1.97 and $1.58 billion (GAAP), respectively. Despite beating expectations, both GAAP earnings and revenue declined meaningfully year-over-year, with net earnings down 37%. Margins also shrank, highlighting tougher conditions in the housing sector. The quarter showed operational progress, especially in community expansion and capital management, but profitability and longer-term demand indicators weakened.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Diluted) | $2.04 | $1.97 | $3.15 | (35.2%) |
| Revenue | $1,616 million | $1,580.5 million | $1,694 million | (4.6%) |
| Home Closing Gross Margin | 21.1% | 25.9% | (4.8) pp | |
| SG&A as % of Revenue | 10.2% | 9.3% | 0.9 pp | |
| Net Earnings | $147 million | $232 million | (36.5%) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Overview of Meritage Homes and Key Business Drivers
Meritage Homes, founded in 1985, is among the largest homebuilders in the U.S, standing out for its entry-level and first move-up homes that emphasize affordability, energy efficiency, and quick move-in timelines. The company’s 100 % speculative building strategy—where homes are built in advance of sale—enables shorter sale-to-close times, matching the appeal of resale homes for buyers needing flexibility. It operates primarily in fast-growing markets across the West, Central, and East regions of the country.
Recent business priorities for Meritage have centered on expanding its community footprint and maintaining a robust pipeline of land owned or controlled for future development. It has also focused on streamlining construction, maintaining liquidity, and returning capital through dividends and buybacks. The builder’s competitive position relies heavily on the ability to deliver affordable, energy-efficient homes at scale while controlling cycle times and direct costs—a necessity in an environment characterized by volatile mortgage rates and shifting consumer sentiment.
Quarterly Highlights: Sales, Margins, and Operations
During Q2 2025, Meritage delivered 4,170 homes—an increase of 1% from the prior year. However, total revenue from closings (GAAP) dropped by 4%, reflecting a 6% fall in the average sales price (ASP) per home to $387,000. Leadership attributed the revenue drop to the 6% decrease in ASP on closings to $387,000, which was partially offset by a 1% higher home closing volume. This price pressure mainly came from extensive use of financing incentives, such as mortgage rate buy-downs, which allow buyers to secure a lower monthly payment without requiring a direct price cut on the home itself.
New orders showed a 3 % increase in units, but order value decreased 2 % and ASP on orders fell by 5%. This means higher contract activity was driven by a 7% increase in average community count and partially offset by a 4% decrease in average absorption pace, not increased demand per site. The number of homes in ending backlog—sales contracted but not yet closed—fell 36% to 1,748 units, and their total value dropped 37% to $695 million.
Gross margin on home closings—the difference between sales revenue and direct costs—compressed sharply to 21.1%, down from 25.9% in Q2 2024 (GAAP). Management cited “increased utilization of financing incentives as well as higher lot costs and terminated land deal walk-away charges” as the main culprits for the decline in home closing gross margin. Margins were also pressured by a $4.2 million expense for terminated land deals. Selling, general, and administrative expenses (SG&A) increased as a percentage of revenue to 10.2%, driven by higher commissions, start-up costs for new divisions, and increased spending to maintain inventory.
Net earnings (GAAP) dropped to $147 million, which represents a 36% contraction from the prior year. Diluted EPS slumped 35% to $2.04 (GAAP). The company’s effective tax rate also increased, influenced by lower availability of energy tax credits as a result of regulatory changes. Overall, the results reflect resilience in operating against a tough backdrop, but with lower profitability and continued pressure on sales pace and pricing.
On the land and community side, Meritage closed Q2 2025 with 312 active communities, up 9 % from a year ago, and controlled or owned about 81,900 lots for future development as of June 30, 2025. Land acquisition and development spending was scaled back to $509 million, and management is now targeting $2.0 billion for full-year land acquisition and development spend, down from $2.5 billion previously, reflecting a cautious stance as the sales environment remains uncertain. The company added nearly 1,800 lots but terminated contracts on nearly 1,800, aiming for discipline in land purchases during this period.
The Central and West regions experienced declines in both closings and revenue. Notably, average sales prices declined in all regions.
The company’s liquidity remains robust, with $930 million in cash as of June 30, 2025, up sharply from year-end 2024, aided by a $492 million senior note issuance in Q1 2025. Net debt-to-capital ratio stood at 14.6 %. Capital returns to shareholders totaled $76 million, including $45 million in share repurchases and $31 million paid in dividends. Management increased its quarterly dividend to $0.43 per share in Q1 2025, reflecting a 15% rise year-over-year in the first quarter of 2025. For Q2 2025, dividends paid were higher at $31 million versus $27 million in Q2 2024.
Business Focus: Product Mix, Efficiency, and Sustainability
The company’s product lineup is built around affordable, energy-efficient homes with advanced home automation features. These homes, aimed at entry-level and first move-up buyers, support shorter delivery cycles and align well with the needs of younger buyers and those priced out of the broader housing market. The “move-in ready” approach means Meritage guarantees the home will be ready to close in 60 days or less, a key selling point compared to competitors and resale listings. This strategy also offers flexibility for buyers to meet specific timelines and reduce uncertainty during the buying process.
Operational efficiency remains central to the business. Construction cycle times—a measure of how quickly a home can be built and delivered—have held steady at about 120 days, supporting rapid inventory turnover. Cost controls and negotiations with suppliers also produced per-home direct cost savings, although these have not been enough to prevent the overall margin decline. A disciplined land acquisition strategy, with a focus on maintaining a four-to-five-year supply of lots, enables the company to respond to changing market conditions while limiting exposure to land price swings.
Sustainability is another important differentiator. Meritage is recognized as an eleven-time EPA ENERGY STAR Partner of the Year and a four-time winner of the Indoor airPLUS Leader Award. Its energy-efficient homes appeal to environmentally conscious buyers, and these features help reduce total ownership costs, further supporting the company’s focus on affordability and value.
Looking Ahead: Guidance and What to Watch
Management reiterated its full-year 2025 outlook, relying on continued community count growth and healthy liquidity to support performance. The company had previously provided specific quarterly guidance projecting 3,800 to 4,100 closings, $1.5 to $1.65 billion in revenue, gross margin of about 21.5%, and EPS of $1.85 to $2.10 for Q2 2025, plus an effective tax rate of roughly 24.5%, showing management’s operational consistency. No additional explicit guidance was given for the next quarter or remainder of the year in the latest announcement. Risks cited include persistence of high mortgage rates, weak consumer confidence, and uncertainty around tariffs or supply chain costs.
For investors, key focus areas moving forward include how effectively Meritage can sustain sales and grow its order book now that backlog levels have fallen. Margin trends and the impact of incentive spending on profitability will also be closely watched, along with the balance between expanding community count and restraining land investment. With the builder’s share repurchases and dividend growth outpacing prior commitments, management has signaled commitment to capital returns as conditions permit. Dividend increases in 2025 highlight this focus: the quarterly dividend was raised 15% to $0.43 per share in Q1 2025, and $31 million was paid out in Q2.
MTH does pay a dividend, and the recently increased payment signals management’s ongoing return strategy.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
