Oct 29, 2026 earnings call — Managing inventory, incentives, and product mix
Meritage closed 3,187 homes and generated $1.2 billion in home closing revenue this quarter, with adjusted diluted EPS of $1.11.
Revenue $1.2B (est $1.3B) · EPS $1.11 (est $1.17)
Key quotes
"we are taking deliberate actions across all facets of the business to maximize cash generation, preserve liquidity, and maintain capital flexibility."
"rising mortgage rates have further constrained affordability, increasing rate buydown costs and overall incentive usage, and made homebuyers more hesitant to commit to a home purchase."
"we've been reallocating capital over the last few quarters towards 1MU as we advance our previously communicated goal of 1MU representing about one-third of our overall portfolio."
Analyst Q&A 9
optimal sales pace
Q (Trevor Allinson · Wolfe): How to balance sales pace and price to preserve margins; and how incentives now compare to Q3.
A: They aim to operate between three and four net sales per month and will be prudent because the market currently feels very inelastic. They are not giving guidance because visibility is low, and they started Q4 at the higher rate of incentives from Q3 but will not push further where it won't move demand.
"As we stated, we're most efficient when we operate between three and four net sales per month." — Phillippe Lord (CEO)
build-for-rent choices
Q (Alan Ratner · Zelman): Did you exit markets or individual communities for BFR sales, and is BFR a bigger opportunity after the new law?
A: They clarified they exited individual communities, not entire markets, and sold five communities where selling to BFR returned capital faster. BFR remains a small, low-single-digit part of the business but is useful when it can take an entire community off their hands.
"We are happy about all the markets that we are in." — Hilla Sferruzza (CFO)
demand differences across markets
Q (Stephen Kim · Evercore): Are demand conditions converging across markets, and is 3.0 net sales a floor? Also, how many specs per community is target?
A: Housing remains local; some markets like Dallas, Houston, parts of Florida and core infill West perform well while others vary. They do not expect to operate below 3.0 over an extended period and prefer 3–4 net sales per month; they like about four to six months of sales inventory depending on seasonality.
"If you can unlock it and solve it with the right product and the right price and location, there is still a lot of opportunities." — Hilla Sferruzza (CFO)
could demand bounce back quickly?
Q (John Lovallo · UBS): If rates and sentiment improve, would buyer demand rebound quickly? And thoughts on spring after recent shocks?
A: They said demand would recover quickly if rates, gas prices, and political noise ease, and they plan to be ready to capitalize. But they remain cautious because housing is psychological and recovery depends on whether consumer sentiment improves into spring.
"But yeah, if there's less noise politically, if there's lower rates, if gas prices come down, I think demand would recover very quickly, and we plan to be ready for that." — Phillippe Lord (CEO)
balance sheet and cash targets
Q (Susan Maklari · Goldman Sachs): What levels of cash and leverage are comfortable now and any high-level balance-sheet priorities?
A: Their non-negotiables are maintaining investment-grade rating, net debt to capital in the low 20s, and continuing the dividend. They will manage liquidity and adjust land, SG&A, and starts to achieve those goals while keeping sufficient liquidity as part of being investment-grade.
"When you think about our balance sheet, liquidity, capital allocation, our two non-negotiables are investment grade and the net debt to cap in the low 20s and to continue to pay our dividend." — Phillippe Lord (CEO)
impairments and zero-margin homes
Q (Rafe Jadrosich · BofA): How do the impairments and zero-margin homes work, timing, and impact on margins?
A: They said impairments relate to five communities and closings from those homes spread across Q3, Q4, Q1, and Q2, creating some margin noise but not material impact. Management will scrutinize land deals and rationalize land to ensure long-term profitability, using land acquisition/development as the capital allocation lever.
"We didn't provide any incremental detail beyond five communities, but you can take a five communities, average communities, you know what our average community size is, and kind of spread it over a year, right?" — Hilla Sferruzza (CFO)
regional community openings
Q (Jonathan Bettenhausen · Truist): Did you add more Central communities by design to boost sales pace, and do target sales paces differ by region?
A: Some of the Central additions reflect timing and big investments in Texas; long-term they intentionally over-index capital to East and Central. Targets vary by community: more affordable communities can achieve higher absorption, higher ASP communities tend to run lower, and the blend targets about four net sales per month.
"As we indicated on our call, we expect our community count year-end to be somewhere around 5%-10% year-over-year growth." — Phillippe Lord (CEO)
rate buydowns and SG&A savings
Q (Michael Rehaut · Melius): Have offered buydown rates moved and how much SG&A savings were captured this year?
A: For buydowns, it's a mix: they are offering higher absolute rates than 12–18 months ago, but not the full mortgage-rate increase, so the cost increase is split. On SG&A, most commission/selling costs are variable and savings are from intentional G&A cuts; they see more efficiency gains from technology into 2027.
"So, we are not offering the same rate that we used to offer maybe 18 months ago or 12 months ago." — Hilla Sferruzza (CFO)
guidance and labor impact on 60-day closes
Q (Jay McCanless · Citizens): Is competitor spec pressure a reason for no guidance? And has labor availability affected 60-day closings?
A: They said lack of macro visibility, not competitor specs, is the main reason for no guidance because results move week to week and Q3 visibility exceeded current visibility. Labor issues exist in some locations but have had negligible impact on their 60-day cycle times due to their repeatable spec model.
"Look, we had more visibility in Q3 than we do right now, and we did not quite hit the mid-range of our guidance." — Phillippe Lord (CEO)