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In the last-reported quarter, the company’s earnings and revenues surpassed the Zacks Consensus Estimate by 20.4% and 15.4%, respectively. Earnings and revenues also increased 54.6% and 22.1%, respectively, from the prior year on the back of higher pricing.
On an encouraging note, earnings topped analysts’ expectations in 19 of the 20 trailing quarters.
Trend in Estimate Revision
The Zacks Consensus Estimate for the fiscal first-quarter earnings has decreased to $1.37 per share from $1.38 over the past 60 days. The said figure indicates a 10.5% rise from the year-ago earnings of $1.24 per share. The consensus mark for revenues is pegged at $1.74 billion, suggesting a 2.7% year-over-year decrease.
Toll Brothers’ fiscal first-quarter home sales are expected to have decreased from the year-ago level despite higher pricing due to ongoing challenges in the industry comprising a softer demand environment. The increase in mortgage rates since March 2022, along with uncertain macroeconomic conditions, are playing the spoilsport.
Nonetheless, a lack of available supply and its focus on luxury move-up buyers — who already possess a residence and are looking to shift to larger and better homes — will somewhat contribute to the revenues. Toll Brothers has been enjoying greater pricing power than other homebuilding companies as these homebuyers are less sensitive to price changes. The company has also been benefiting from the strategy of broadening its product lines, price points and geographies.
During the fiscal fourth-quarter earnings call, TOL highlighted that it expects home deliveries of 1,750-1,850 units (indicating a decrease from 1,929 units delivered in the prior-year quarter) at an average price of $950,000-$970,000 (suggesting a rise from $874,700 a year ago).
The Zacks Consensus Estimate for the home sales revenue is pegged at $1,722 million, indicating a decline from $3,581 million sequentially but a slight increase from $1,687.4 million a year ago.
Now, unprecedented supply-chain issues, increased inflation and higher land, labor and raw material costs are expected to have put pressure on fiscal first-quarter margins. That said, the company has been tightening its costs which are expected to reflect in its quarterly result.
Toll Brothers expects the adjusted home sales gross margin to be 27%, implying an increase from 25.6% in the year-ago period. SG&A expenses are estimated to be 13.5% of home sales revenues, indicating a slight rise from 13.4% in the year-ago period. Also, the company expects the effective tax rate to be 26%.
Estimates
The Zacks Consensus Estimate for the backlog is pegged at 7,501 units, indicating a decline from $11,302 million a year ago. The same for the backlog (in values) is pegged at $7,983 million implying a decline from $8,874 million at the fourth quarter of fiscal 2022-end. The consensus estimate for net signed contracts is pegged at 1,198 units. This indicates a decline from the prior-year figure of 2,929 units.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict an earnings beat for Toll Brothers this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.18%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Meritage Homes Corporation (MTH - Free Report) reported impressive results for fourth-quarter 2022, where earnings and total closing revenues surpassed the Zacks Consensus Estimate. The metrics also rose from the year-ago quarter’s levels, thanks to higher volumes and pricing.
MTH’s quarterly earnings of $7.09 per share topped the Zacks Consensus Estimate of $7.03 by 0.9% and increased by 13% year over year from $6.25 posted a year ago. The uptrend was due to higher home closing revenue, improved overhead leverage and a lower outstanding share count.
D.R. Horton, Inc. (DHI - Free Report) reported first-quarter fiscal 2023 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.
DHI’s chairman of the board, Donald R. Horton, said, “Beginning in June 2022 and continuing through today, we have seen a moderation in housing demand caused by significant increases in mortgage interest rates and general economic uncertainty. While these pressures may persist for some time, the supply of both new and existing homes at affordable price points remains limited and demographics supporting housing demand remain favorable.”
NVR, Inc. (NVR - Free Report) reported fourth-quarter 2022 results, wherein this homebuilding and mortgage banking company’s earnings and revenues beat the Zacks Consensus Estimate.
NVR reported earnings of $133.44 per share, which surpassed the consensus mark of $104.10 by 28.2%. The reported figure increased 49.8% from the prior-year quarter’s figure of $89.09 per share.
Image: Bigstock
Toll Brothers (TOL) to Post Q1 Earnings: What to Expect?
Toll Brothers, Inc. (TOL - Free Report) is scheduled to report first-quarter fiscal 2023 (ended Jan 31, 2023) results on Feb 21, after the closing bell.
In the last-reported quarter, the company’s earnings and revenues surpassed the Zacks Consensus Estimate by 20.4% and 15.4%, respectively. Earnings and revenues also increased 54.6% and 22.1%, respectively, from the prior year on the back of higher pricing.
On an encouraging note, earnings topped analysts’ expectations in 19 of the 20 trailing quarters.
Trend in Estimate Revision
The Zacks Consensus Estimate for the fiscal first-quarter earnings has decreased to $1.37 per share from $1.38 over the past 60 days. The said figure indicates a 10.5% rise from the year-ago earnings of $1.24 per share. The consensus mark for revenues is pegged at $1.74 billion, suggesting a 2.7% year-over-year decrease.
Toll Brothers Inc. Price and EPS Surprise
Toll Brothers Inc. price-eps-surprise | Toll Brothers Inc. Quote
Factors to Note
Toll Brothers’ fiscal first-quarter home sales are expected to have decreased from the year-ago level despite higher pricing due to ongoing challenges in the industry comprising a softer demand environment. The increase in mortgage rates since March 2022, along with uncertain macroeconomic conditions, are playing the spoilsport.
Nonetheless, a lack of available supply and its focus on luxury move-up buyers — who already possess a residence and are looking to shift to larger and better homes — will somewhat contribute to the revenues. Toll Brothers has been enjoying greater pricing power than other homebuilding companies as these homebuyers are less sensitive to price changes. The company has also been benefiting from the strategy of broadening its product lines, price points and geographies.
During the fiscal fourth-quarter earnings call, TOL highlighted that it expects home deliveries of 1,750-1,850 units (indicating a decrease from 1,929 units delivered in the prior-year quarter) at an average price of $950,000-$970,000 (suggesting a rise from $874,700 a year ago).
The Zacks Consensus Estimate for the home sales revenue is pegged at $1,722 million, indicating a decline from $3,581 million sequentially but a slight increase from $1,687.4 million a year ago.
Now, unprecedented supply-chain issues, increased inflation and higher land, labor and raw material costs are expected to have put pressure on fiscal first-quarter margins. That said, the company has been tightening its costs which are expected to reflect in its quarterly result.
Toll Brothers expects the adjusted home sales gross margin to be 27%, implying an increase from 25.6% in the year-ago period. SG&A expenses are estimated to be 13.5% of home sales revenues, indicating a slight rise from 13.4% in the year-ago period. Also, the company expects the effective tax rate to be 26%.
Estimates
The Zacks Consensus Estimate for the backlog is pegged at 7,501 units, indicating a decline from $11,302 million a year ago. The same for the backlog (in values) is pegged at $7,983 million implying a decline from $8,874 million at the fourth quarter of fiscal 2022-end. The consensus estimate for net signed contracts is pegged at 1,198 units. This indicates a decline from the prior-year figure of 2,929 units.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict an earnings beat for Toll Brothers this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.18%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.
Recent Construction Releases
Meritage Homes Corporation (MTH - Free Report) reported impressive results for fourth-quarter 2022, where earnings and total closing revenues surpassed the Zacks Consensus Estimate. The metrics also rose from the year-ago quarter’s levels, thanks to higher volumes and pricing.
MTH’s quarterly earnings of $7.09 per share topped the Zacks Consensus Estimate of $7.03 by 0.9% and increased by 13% year over year from $6.25 posted a year ago. The uptrend was due to higher home closing revenue, improved overhead leverage and a lower outstanding share count.
D.R. Horton, Inc. (DHI - Free Report) reported first-quarter fiscal 2023 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.
DHI’s chairman of the board, Donald R. Horton, said, “Beginning in June 2022 and continuing through today, we have seen a moderation in housing demand caused by significant increases in mortgage interest rates and general economic uncertainty. While these pressures may persist for some time, the supply of both new and existing homes at affordable price points remains limited and demographics supporting housing demand remain favorable.”
NVR, Inc. (NVR - Free Report) reported fourth-quarter 2022 results, wherein this homebuilding and mortgage banking company’s earnings and revenues beat the Zacks Consensus Estimate.
NVR reported earnings of $133.44 per share, which surpassed the consensus mark of $104.10 by 28.2%. The reported figure increased 49.8% from the prior-year quarter’s figure of $89.09 per share.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.