Meritage Homes (MTH) and Taylor Morrison (TMHC) Downgraded to Neutral by BofA on 2026 Earnings Risks
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 16 2026
0mins
Source: seekingalpha
- Rating Downgrade: BofA Securities downgraded Meritage Homes and Taylor Morrison Home from Buy to Neutral due to downside risks to 2026 earnings, reflecting a cautious outlook on the industry's future.
- Market Performance: Despite homebuilder stocks rallying 13% year-to-date, significantly outperforming the S&P 500's 1%, analysts highlight that weak employment and migration trends, along with ongoing inflation, will pressure fundamentals.
- Earnings Forecast Adjustment: BofA expects a decline in return on equity across most builders and has reduced its 2026 EPS estimates by 6%, indicating a conservative outlook on gross margins, particularly for Meritage due to higher land cost pressures.
- Intensified Competition: Analysts believe that while upcoming housing policy announcements may improve market sentiment, lower mortgage rates are unlikely to significantly boost entry-level demand, potentially increasing resale inventory and intensifying competition for new home sales.
Get Free Real-Time Notifications for Any Stock
Monitor tickers like MTH with instant alerts to capture every critical market movement.
Sign up for free to build your custom watchlist and receive professional-grade stock notifications.
Analyst Views on MTH
Wall Street analysts forecast MTH stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for MTH is 85.50 USD with a low forecast of 74.00 USD and a high forecast of 104.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
6 Analyst Rating
2 Buy
4 Hold
0 Sell
Moderate Buy
Current: 69.180
Low
74.00
Averages
85.50
High
104.00
Current: 69.180
Low
74.00
Averages
85.50
High
104.00
About MTH
Meritage Homes Corporation is a designer and builder of single-family attached and detached homes. The Company’s segments include homebuilding and financial services. The homebuilding segment is engaged in the business of acquiring and developing land, constructing homes, marketing and selling those homes and providing warranty and customer services. It has operations in three regions: West, Central and East, which are comprised of 12 states: Arizona, California, Colorado, Utah, Texas, Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, and Tennessee. These three regions are its principal homebuilding segments. The financial services segment offers title and escrow, mortgage, and insurance services. Its financial services operations also provide mortgage services to its homebuyers through an unconsolidated joint venture. The Company’s homebuilding activities are conducted under the name of Meritage Homes in each of its homebuilding markets.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Meritage Homes Q4 2025 Earnings Call Insights
- Delivery Performance: Meritage Homes delivered 3,755 homes in Q4 2025, generating $1.4 billion in revenue, despite a 7% decline in delivery volume compared to the previous year, highlighting ongoing market demand challenges.
- Capital Allocation Strategy: The company strategically terminated certain land deals to redeploy capital, planning to buy back $400 million in shares in 2026, aiming to enhance long-term portfolio value creation.
- Financial Metrics: The adjusted gross margin for the fourth quarter was 19.3%, down from 23.3% a year ago, primarily impacted by $27.9 million in land deal termination charges and other nonrecurring expenses, indicating pressure on profitability.
- Future Outlook: The company expects 2026 closings to align with 2025 performance, with community count growth projected at 5% to 10%, while management remains optimistic about potential improvements in the spring selling season despite ongoing affordability challenges and market uncertainties.
Continue Reading
Meritage Homes Reports Q4 and Full Year 2025 Results
- Stable Sales Orders: Meritage Homes reported full-year sales orders of 14,650 homes for 2025, consistent with the previous year, demonstrating effective strategies in opening new communities and managing inventory despite market challenges.
- Significant Revenue Decline: The company recorded home closing revenue of $1.4 billion in Q4 2025, a 12% year-over-year decrease primarily due to lower closing volume and average sales prices, reflecting ongoing pressures in the affordable housing market.
- Gross Margin Decline: The home closing gross margin for Q4 2025 was 16.5%, down 670 basis points from the prior year, largely impacted by non-recurring charges and increased utilization of incentives, indicating challenges in cost control.
- Shareholder Return Strategy: In Q4 2025, Meritage repurchased 2.2 million shares for $150 million, emphasizing a focus on capital utilization in current market conditions, while planning to repurchase $400 million in shares in 2026 to address stock undervaluation.
Continue Reading