MTH · Meritage Homes
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $73.29
Note written ·
Price against the kill line
12.0% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $73.29, on record since 11 November 2026. The shares are down 10.1% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $73.29, which would put the shares well above the 9 November 2026 close of $70.34 and show them leading the S&P 500. A fourth-quarter report showing orders up from a year earlier would also show the shares leading.
Research onlyNot in the portfolio.
Key figures from the filings · Consumer Discretionary
Quarter to 30 September 2026, filed 30 October 2026; valuation at the 13 November 2026 close
- Free cash flow, four quarters ($M)
- 484
- Net cash, cash less debt ($M)
- −1,707
- Price to earnings (×)
- 13.9
- Free-cash-flow yield (%)
- 11.6
All filed numbers
What Meritage Homes reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Pre-tax income ($M) | 84.8 |
| Net income ($M) four quarters: 298 | 67.8 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | −8.5 |
| Operating cash flow ($M) | 503 |
| Capital spending ($M) | 19.5 |
| Free cash flow ($M) | 484 |
| Cash and short-term investments ($M) | 678 |
| Debt ($M) convertible debt plus notes | 2,384 |
| Net cash, cash less debt ($M) | −1,707 |
| Deferred revenue ($M) −19.0% on a year | 7.6 |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | Not reported |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) | 5,044 |
| Market value ($M) | 4,153 |
| Enterprise value, market value plus net debt ($M) | 5,860 |
| Enterprise value to sales (×) | Not available |
| Enterprise value to operating income (×) | Not available |
| Price to earnings (×) | 13.9 |
| Price to book value (×) | 0.8 |
| Free-cash-flow yield (%) | 11.6 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 8.0% of shares outstanding sold short, 5.0 days of average trading to cover, +28.8% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $0 |
| 12 monthsfrom | $0 | $5.0M |
The thesis
Meritage Homes' shares are more likely to lag the S&P 500 over the next three months. The rate-driven rebound has reversed, and the third-quarter report showed orders down 15%, a weaker margin and no forward guidance. The November builder-sentiment index, due around 17 November 2026, and the weekly Freddie Mac mortgage readings test whether rates can restart the move.
The shares closed at $70.34 on 9 November 2026, then at $67.25 on 10 November 2026, $66.53 on 11 November 2026 and $64.80 on 12 November 2026. Company news in that stretch was an industry award (11 November 2026) and a home donation (10 November 2026); neither bears on orders or margin. The 10-Q filed on 30 October 2026 carried the same quarter's numbers already reported.
Freddie Mac's 30-year fixed mortgage rate averaged 7.18% in the week ending 5 November 2026, down from 7.24% the week before and 7.32% on 22 October 2026. That was the third straight weekly decline. Meritage's own results did not move with it.
Bullish and bearish views on Meritage Homes Corporation
The bull case on Meritage Homes Corporation (MTH), in brief: mortgage rates have eased. The bear case: orders are falling.
Bull case
- Mortgage rates have eased. Freddie Mac's 30-year average fell to 7.18% in the week ending 5 November 2026, the third straight weekly decline. Further declines would help entry-level buyers, who dominate Meritage's Sun Belt volume.
- Adjusted earnings were close to expectations. Adjusted diluted earnings per share were $1.11 and GAAP (generally accepted accounting principles) diluted earnings per share were $1.04 in the third quarter (Form 8-K, 28 October 2026).
- The balance sheet carries little pressure. Cash was $677 million with no revolver borrowings, and net debt-to-capital was 18.9% at 30 September 2026 (Form 8-K, 28 October 2026).
- Buyback capacity remains. Meritage repurchased 757,128 shares for $55 million in the third quarter and had $229 million left under its authorization at 30 September 2026 (Form 8-K).
- Land spending is lower. Panabee reported land investment of $329 million in the third quarter, almost 40% lower than a year earlier (28 October 2026).
Bear case
- Orders are falling. Third-quarter orders were 3,083 homes, down 15% from a year earlier. Backlog was 1,611 homes worth $637.2 million (Form 8-K, 28 October 2026).
- Revenue and margin both fell. Home closing revenue was $1,162.4 million, down 17%, on 3,187 closings. GAAP home closing gross margin was 17.4% against 19.1% a year earlier, and adjusted margin was 17.9% against 20.1% (Form 8-K, 28 October 2026).
- Results missed expectations. Benzinga reported adjusted earnings per share of $1.11 against a $1.18 estimate and sales of $1.168 billion against $1.305 billion (28 October 2026).
- Visibility is gone. The 28 October 2026 release contains no guidance for the fourth quarter, the full year 2026 or 2027.
- Analysts have cut targets. Truist cut its target to $65 from $72 with a Hold rating, and Evercore ISI cut its target to $64 with an In-Line rating (company news, 30 October 2026).
- Builder sentiment is at a multi-year low. The NAHB/Wells Fargo index was reported at a 14-year low on 29 October 2026.
Price setup
The shares closed at $64.80 on 12 November 2026. That is 24.1% below the 52-week high of $85.38 (intraday, 26 June 2026) and 10.7% lower over three months. The 52-week closing low is $57.85, set on 12 October 2026.
The 50-day average is $63.84 and the 200-day average is $67.97, both adjusted and as of 12 November 2026. The close sits just above the first and below the second. The shares closed above $70 on 9 November 2026 and have given back that move over three sessions.
The market is pricing the shares close to the cut analyst targets: the close is just under Truist's $65 target and above Evercore ISI's $64 target, both set after the 28 October 2026 report. The rate-driven gain of early November no longer shows in the price. No SEC Form 4 insider transactions appear in recent filings.
Catalysts ahead
- ~17 November 2026 (est.): NAHB/Wells Fargo Housing Market Index for November. Shows whether builder sentiment recovers from the 14-year low reported on 29 October 2026.
- ~19 November 2026 (est.): Freddie Mac weekly 30-year mortgage survey. Shows whether the rate decline to 7.18% in the week ending 5 November 2026 resumes.
- ~20 November 2026 (est.): October existing-home sales from the National Association of Realtors. Shows whether lower mortgage rates are drawing buyers back into the market.
What would change the view
A daily close above $73.29, which would put the shares well above the 9 November 2026 close of $70.34 and show them leading the S&P 500. A fourth-quarter report showing orders up from a year earlier would also show the shares leading.
What it trades with
Meritage's volume is weighted to entry-level Sun Belt markets. The shares have moved with the Freddie Mac 30-year rate and the 10-year Treasury yield. Builder peers react to the same mortgage data and the NAHB index, and the NAHB South regional reading is a closer gauge of Meritage's markets than the national headline.
The evidence, claim by claim (8)
- Third-quarter 2026 orders were 3,083 homes, down 15% from a year earlier; closings were 3,187; home closing revenue was $1,162.4 million, down 17%; backlog was 1,611 homes worth $637.2 million. Meritage Homes third-quarter 2026 earnings release (Form 8-K) · as of
- Home closing gross margin was 17.4% (adjusted 17.9%) against 19.1% (adjusted 20.1%) a year earlier; diluted earnings per share were $1.04 and adjusted diluted earnings per share were $1.11. Meritage Homes third-quarter 2026 earnings release (Form 8-K) · as of
- Cash was $677 million with no revolver borrowings; net debt-to-capital was 18.9%; third-quarter repurchases were 757,128 shares for $55 million, with $229 million remaining under the authorization. Meritage Homes third-quarter 2026 earnings release (Form 8-K) · as of
- The third-quarter release contains no guidance for the fourth quarter of 2026, the full year 2026 or 2027. Meritage Homes third-quarter 2026 earnings release (Form 8-K) · as of
- Adjusted earnings per share of $1.11 missed the $1.18 estimate and sales of $1.168 billion missed the $1.305 billion estimate. Benzinga · as of
- Truist cut its target to $65 from $72 (Hold); Evercore ISI cut its target to $64 (In-Line). Company news, analyst notes · as of
- Freddie Mac's 30-year fixed mortgage rate averaged 7.18% for the week ending 5 November 2026, down from 7.24% the prior week, the third straight weekly decline. Freddie Mac weekly survey via WCAX news report · as of
- The shares closed at $64.80 on 12 November 2026, against $70.34 on 9 November 2026. Daily closes · as of
Sources
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