Homebuilder Meritage Homes (NYSE: MTH) fell short of the market’s revenue expectations in Q2 CY2026, with sales falling 14.3% year on year to $1.40 billion. Its non-GAAP profit of $1.42 per share was 9.2% above analysts’ consensus estimates.

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"The 2026 spring selling season remained softer than expected this quarter as macroeconomic uncertainty and volatile interest rates continued to pressure buyer psychology. Although below prior year levels, our second quarter 2026 absorptions reflected pockets of solid performance which accelerated community close outs in some markets," said Steven J. Hilton, executive chairman of Meritage Homes.

Company Overview

Originally founded in 1985 in Arizona as Monterey Homes, Meritage Homes (NYSE: MTH) is a homebuilder specializing in designing and constructing energy-efficient and single-family homes in the US.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Meritage Homes grew its sales at a sluggish 1.8% compounded annual growth rate. This fell short of our benchmarks and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Meritage Homes’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 8.7% annually. Meritage Homes isn’t alone in its struggles as the Home Builders industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

We can better understand the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Meritage Homes’s backlog reached $661.9 million in the latest quarter and averaged 4,850% year-on-year growth over the last two years. Because this number is better than its revenue growth, we can see the company accumulated more orders than it could fulfill and deferred revenue to the future. This could imply elevated demand for Meritage Homes’s products and services but raises concerns about capacity constraints.

This quarter, Meritage Homes missed Wall Street’s estimates and reported a rather uninspiring 14.3% year-on-year revenue decline, generating $1.40 billion of revenue.

Looking ahead, sell-side analysts expect revenue to grow 4.8% over the next 12 months. While this projection implies its newer products and services will catalyze better top-line performance, it is still below average for the sector.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses — everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Meritage Homes has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 15.2%.

Analyzing the trend in its profitability, Meritage Homes’s operating margin decreased by 13.8 percentage points over the last five years. Many Home Builders companies also saw their margins fall (along with revenue, as mentioned above) because the cycle turned in the wrong direction. We hope Meritage Homes can emerge from this a stronger company, as the silver lining of a downturn is that market share can be won and efficiencies found.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth — for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Meritage Homes, its EPS declined by 7.7% annually over the last five years while its revenue grew by 1.8%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

We can take a deeper look into Meritage Homes’s earnings to better understand the drivers of its performance. As we mentioned earlier, Meritage Homes’s operating margin declined by 13.8 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Meritage Homes, its two-year annual EPS declines of 33.5% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q2, Meritage Homes reported adjusted EPS of $1.42, down from $2.04 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 9.2%. Over the next 12 months, Wall Street expects Meritage Homes’s full-year EPS to grow 13.6% from $5.03 to $5.71.

Key Takeaways from Meritage Homes’s Q2 Results

It was good to see Meritage Homes beat analysts’ EPS expectations this quarter. On the other hand, its revenue slightly missed. Overall, this was a softer quarter. The stock remained flat at $71.59 immediately following the results.

Big picture, is Meritage Homes a buy here and now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).