Why Is Meritage (MTH) Up 7.8% Since Last Earnings Report?

Core Viewpoint - Meritage Homes reported mixed results for Q4 2025, with adjusted earnings exceeding estimates while total revenues fell short, indicating ongoing challenges in the housing market [2][4]. Earnings and Revenue Summary - Adjusted earnings per share (EPS) were $1.67, surpassing the Zacks Consensus Estimate of $1.55 by 7.7%, but down 30.1% year-over-year from $2.39 [4]. - Total revenues amounted to $1.436 billion, a decline from $1.622 billion in the previous year [4]. Segment Performance - Homebuilding revenues were $1.428 billion, down 12% year-over-year and missing the consensus estimate by 5.2% [5]. - Home closing revenues of $1.406 billion also fell 12% year-over-year due to lower average selling prices (ASPs) and reduced closing volumes [5][6]. - Land closing revenues increased by 21% year-over-year to $21.1 million [5]. Operational Metrics - The company closed 3,755 homes, down from 4,044 units in the prior year, with an ASP decline of 5% to $375,000 [6]. - Total home orders decreased by 2% year-over-year to 3,224 units, with a dollar value drop of 9% to $1.206 billion [6]. - The backlog at quarter-end was 1,168 units, down 24% year-over-year, with a value decrease of 30% to $440.6 million [7]. Margin and Cost Analysis - Home closing gross margin contracted by 670 basis points to 16.5%, influenced by non-recurring charges and higher lot costs [7]. - Adjusted home closing gross margin was 19.3%, down 400 basis points year-over-year [7]. - SG&A expenses as a percentage of home closing revenues were 10.6%, slightly down from 10.8% in the prior year [8]. Financial Position - Meritage Homes ended 2025 with $775.2 million in cash and equivalents, an increase from $651.6 million at the end of 2024 [10]. - The debt-to-capital ratio was 26%, with a net debt-to-capital ratio of 16.9% [10]. - The company repurchased 4,289,984 shares for $295 million and paid $121 million in dividends during 2025 [10]. Future Guidance - The company anticipates home closing volume and revenue to remain consistent with full-year 2025 results [11]. Estimate Trends - There has been a downward trend in estimates, with the consensus estimate shifting down by 19.34% [12]. VGM Scores - Meritage has a subpar Growth Score of D, a Momentum Score of C, and a Value Score of D, placing it in the bottom 40% for investment strategy [13]. Outlook - Estimates are trending downward, leading to a Zacks Rank of 5 (Strong Sell), indicating expectations of below-average returns in the coming months [14].