Key Highlights

● Third-quarter Revenue fell nearly 18% to about $1.17 billion

● Net orders fell 15% to 3,083 homes

● Adjusted home-closing gross Margin fell to 17.9% from 20.1%

● Company ended September with $677 million of cash and no revolver borrowings

Why did Meritage Homes (NYSE:MTH) slip while the broader market rallied on Wednesday? Shares of the Scottsdale, Arizona-based homebuilder closed at $66.50 on November 11, 2026, down $0.75 or about 1.1% from Tuesday's $67.25 close. The stock traded between roughly $65.29 and $66.99. The S&P 500 rose 1.3% and the small-cap Russell 2000 gained 0.9%, so Meritage lagged both. It was the second straight decline after a 4.4% drop on Tuesday.

No company news; rates were the driver

There was no new company-specific catalyst on Wednesday. Meritage issued no press release, guidance update or SEC filing, and no analyst rating change was tied to the move. The pressure came from interest rates. Tuesday's October consumer price report pushed Treasury yields higher. The 10-year yield moved back above 5%, and futures implied roughly an 84% chance of a December Federal Reserve rate hike. One strategist said a December hike now appeared almost fully priced in. The Bond Market was closed for Veterans Day on Wednesday, so yields did not trade, but the rate outlook from Tuesday still weighed on rate-sensitive stocks. Homebuilders are among the most exposed, because Mortgage rates track longer-term Treasury yields and largely determine what buyers can afford.

Wednesday's rally was concentrated in technology. AI and chip stocks rebounded after CoreWeave (NASDAQ:CRWV)'s results, while housing and other consumer-facing groups were left out. Meritage had also been volatile around the midterm elections. It jumped about 9% on November 4 and rose again on November 9 to $70.34, before the Inflation data reversed those gains.

What Meritage does

Meritage builds single-family homes in Sun Belt markets, focusing on entry-level and first move-up buyers. It is known for building many homes before they are sold (speculative, or "spec," homes), which lets it offer quick move-in dates, and for energy-efficient construction.

Why revenue per employee is high

Meritage ranks 76th among US companies with the highest revenue per employee, at about $3.15 million per employee on a fiscal-year basis. That reflects how US production homebuilding works. Builders like Meritage buy and develop land, design homes, manage projects and sell, while most of the actual construction, from framing and roofing to plumbing and electrical work, is done by independent subcontractors who are not on the payroll. Each home sale also brings in a large amount of revenue at once. In the third quarter, Meritage's order average selling price was roughly $383,000, according to its release. With a large base of contract labor and high-priced products, a relatively small corporate and field staff produces several million dollars of revenue per employee.

Recent results and valuation

Third-quarter results, reported October 29, were weak. Revenue of about $1.17 billion fell nearly 18% from a year earlier and missed consensus of about $1.31 billion by roughly 10%. Adjusted EPS of $1.11 fell about 20% and was below the roughly $1.18 Wall Street expected. Closings of 3,187 homes were below the company's own 3,300 to 3,600 range, and net orders fell 15% to 3,083.

Monthly sales per community slowed to about 3.0, from 3.5 in the second quarter and 3.8 a year earlier. The adjusted home-closing gross margin fell to 17.9%, from 20.1% a year earlier. Management withdrew its fourth-quarter and preliminary 2027 guidance, citing week-to-week Volatility in demand. It also cut planned 2026 land spending to below $1.5 billion and dropped its quarterly buyback commitment. Shares fell about 6% to $58.27 on the report before recovering into November.

The Balance Sheet is a strength. Meritage ended September with $677 million of cash, no borrowings on its revolving Credit Facility and net debt-to-capital of 18.9%. Book Value per share was up about 4% from a year earlier. At Wednesday's close, the Market Value was about $4.3 billion, the trailing P/E roughly 15 and the Dividend Yield near 2.8%. The shares were at about book value at a higher price earlier this month, so at Wednesday's price the stock appears to trade below book value.

Sector context

The housing market is under strain. With the Fed now leaning toward raising rates rather than cutting them, mortgage financing remains expensive, and builders have relied on rate buydowns and other incentives to keep buyers. Those incentives reduce margins. Spec-heavy builders are especially exposed, because unsold homes have to be sold even when Demand is weak. Meritage said it had about 5,500 spec homes at the end of the quarter, roughly five months of supply. On the positive side, existing homeowners with low-rate mortgages are reluctant to sell, which keeps resale Supply tight, and new construction continues to make up a large share of homes for sale.

Risks

The near-term risk is further rate increases. A December Fed hike and Treasury yields around or above 5% would likely keep mortgage rates high and reduce affordability for the entry-level buyers Meritage targets. Margins may fall further. Management has said land bought at higher prices between 2022 and 2025 will weigh on gross margin through at least 2027. Withdrawn guidance reduces visibility, and the spec inventory may need larger discounts if demand stays weak. As a small-cap stock in the S&P SmallCap 600 and the Russell 2000, Meritage can also move sharply with shifts in sentiment, as its election-week swings showed.

Rates and Housing Data Ahead

The next signals are rates and housing data. Investors will watch Treasury yields when the bond market reopens, weekly mortgage-rate surveys, the NAHB builder sentiment index, and monthly housing starts and new-home sales. The Fed's December meeting is likely the largest single event for the group. For Meritage, the key questions are whether absorption improves from about three sales per community per month, how much incentive spending is needed to sell spec homes, and whether management restores guidance with fourth-quarter results early next year.