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Toll Brothers (TOL) Up 6.5% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Toll Brothers (TOL - Free Report) . Shares have added about 6.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Toll Brothers due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Toll Brothers Q3 Earnings & Revenues Beat, FY24 View Up
Toll Brothers reported impressive third-quarter fiscal 2024 (ended Jul 31, 2024) results, with earnings and revenues surpassing the Zacks Consensus Estimate. However, on a year-over-year basis, earnings declined despite revenue growth.
Nonetheless, the company witnessed solid deposit and traffic activity through the first three weeks of August. TOL remains optimistic for the future as demand continues to be solid through the end of fiscal 2024 and into 2025. This is mainly backed by lower mortgage rates, favorable demographics, and continued imbalance in the supply and demand of homes for sale.
Backed by solid fiscal third-quarter performance and expectations for the fiscal fourth quarter, TOL has raised its full-year guidance for all key home building metrics.
Earnings & Revenue Discussion
The company reported adjusted earnings per share (EPS) of $3.60, which topped the consensus estimate of $3.28 by 9.8% but declined 3.5% from the year-ago period.
Total revenues (including Home sales and Land sales and others) of $2.73 billion beat the consensus mark of $2.7 billion by 1.2% and increased 1.5% year over year. The growth was attributable to higher deliveries.
Inside the Headlines
The company’s total home sales revenues grew 2% (well above our projection of a decline of 1.3% year over year) from the prior-year quarter to $2.72 billion. Homes delivered were up 11% (ahead of our expectation of down 2% year over year) from the year-ago quarter to 2,814 units. The average price of homes delivered was $986,200 for the quarter, down from the year-ago level of $1,059,700. We had expected ASP to grow 0.6% year over year.
Net-signed contracts for the quarter were 2,490 units, up 11% year over year. The value of net signed contracts was $2.41 billion, reflecting a rise of 11% year over year.
At the fiscal third-quarter end, Toll Brothers had a backlog of 6,769 homes, representing a year-over-year decrease of 7%. Potential revenues from backlog declined 10% year over year to $7.07 billion. The average price of homes in the backlog was $1,044,000 compared with $1,079,500 a year ago.
The cancelation rate (as a percentage of signed contracts) for the reported quarter was 6.4% compared with 9.8% in the prior-year period.
The company’s adjusted home sales gross margin was 28.8%, contracted 50 basis points (bps) for the quarter. SG&A expenses, as a percentage of home sales revenues, were 9%, which increased 40 bps from the year-ago quarter.
Financials
TOL had cash and cash equivalents of $893.4 million at the fiscal third-quarter end compared with $1.3 billion at the fiscal 2023-end. At July-end, it had $1.77 billion available under the $1.96 billion bank revolving credit facility, scheduled to mature in February 2028.
Total debt at the fiscal third-quarter end was $2.82 billion, down from $2.86 billion at the fiscal 2023-end. Debt to capital was 27.6% at the fiscal third-quarter end, down from 29.6% at the fiscal 2023-end.
During the reported quarter, the company repurchased approximately 2.1 million shares at an average price of $118.57 per share for $245.9 million, bringing total repurchases to $427.1 million in the first nine months of fiscal 2024.
Fiscal Fourth-Quarter Guidance
Toll Brothers expects home deliveries of 3,275-3,375 units (indicating a solid growth from 2,755 units delivered in the prior-year quarter) at an average price of $940,000-$950,000 (suggesting a decline from $1,071,100 a year ago).
Adjusted home sales gross margin is expected to be 27.5%, implying a decline from 29.1% in the year-ago period. SG&A expenses are estimated to be 8.6% of home sales revenues, indicating a rise from 8.2% in the year-ago period. The company expects the effective tax rate to be 26%.
Fiscal 2024 Guidance Updated
For fiscal 2024, home deliveries are now anticipated to be in the range of 10,650-10,750 units (versus earlier expectations of 10,400-10,800 units). The estimated range reflects growth from 9,597 units in fiscal 2023. It still expects the period-end community count to be 410.
The average price of delivered homes is now expected to be $975,000 (versus the prior projection of $960,000-$970,000). The estimated range reflects a decrease from $1,027,900 reported in fiscal 2023.
Toll Brothers now expects an adjusted home sales gross margin of 28.3% compared with 28% expected earlier. This reflects a decline from 28.7% reported in fiscal 2023.
SG&A expenses, as a percentage of home sales revenues, are now projected to be 9.4% versus earlier expectations of 9.6% for fiscal 2024, still reflecting an increase from 9.2% reported in fiscal 2023.
For fiscal 2024, the company expects adjusted EPS between $14.50 and $14.75 compared with $12.36 generated a year ago.
The company expects the effective tax rate to be 25.4%, slightly below the previous anticipation of 25.5%. Return on beginning equity is expected to be approximately 22.5%.
TOL now expects approximately $600 million of share repurchases in fiscal 2024, up from $500 million expected earlier.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 6.54% due to these changes.
VGM Scores
Currently, Toll Brothers has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Toll Brothers has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Toll Brothers (TOL) Up 6.5% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Toll Brothers (TOL - Free Report) . Shares have added about 6.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Toll Brothers due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Toll Brothers Q3 Earnings & Revenues Beat, FY24 View Up
Toll Brothers reported impressive third-quarter fiscal 2024 (ended Jul 31, 2024) results, with earnings and revenues surpassing the Zacks Consensus Estimate. However, on a year-over-year basis, earnings declined despite revenue growth.
Nonetheless, the company witnessed solid deposit and traffic activity through the first three weeks of August. TOL remains optimistic for the future as demand continues to be solid through the end of fiscal 2024 and into 2025. This is mainly backed by lower mortgage rates, favorable demographics, and continued imbalance in the supply and demand of homes for sale.
Backed by solid fiscal third-quarter performance and expectations for the fiscal fourth quarter, TOL has raised its full-year guidance for all key home building metrics.
Earnings & Revenue Discussion
The company reported adjusted earnings per share (EPS) of $3.60, which topped the consensus estimate of $3.28 by 9.8% but declined 3.5% from the year-ago period.
Total revenues (including Home sales and Land sales and others) of $2.73 billion beat the consensus mark of $2.7 billion by 1.2% and increased 1.5% year over year. The growth was attributable to higher deliveries.
Inside the Headlines
The company’s total home sales revenues grew 2% (well above our projection of a decline of 1.3% year over year) from the prior-year quarter to $2.72 billion. Homes delivered were up 11% (ahead of our expectation of down 2% year over year) from the year-ago quarter to 2,814 units. The average price of homes delivered was $986,200 for the quarter, down from the year-ago level of $1,059,700. We had expected ASP to grow 0.6% year over year.
Net-signed contracts for the quarter were 2,490 units, up 11% year over year. The value of net signed contracts was $2.41 billion, reflecting a rise of 11% year over year.
At the fiscal third-quarter end, Toll Brothers had a backlog of 6,769 homes, representing a year-over-year decrease of 7%. Potential revenues from backlog declined 10% year over year to $7.07 billion. The average price of homes in the backlog was $1,044,000 compared with $1,079,500 a year ago.
The cancelation rate (as a percentage of signed contracts) for the reported quarter was 6.4% compared with 9.8% in the prior-year period.
The company’s adjusted home sales gross margin was 28.8%, contracted 50 basis points (bps) for the quarter. SG&A expenses, as a percentage of home sales revenues, were 9%, which increased 40 bps from the year-ago quarter.
Financials
TOL had cash and cash equivalents of $893.4 million at the fiscal third-quarter end compared with $1.3 billion at the fiscal 2023-end. At July-end, it had $1.77 billion available under the $1.96 billion bank revolving credit facility, scheduled to mature in February 2028.
Total debt at the fiscal third-quarter end was $2.82 billion, down from $2.86 billion at the fiscal 2023-end. Debt to capital was 27.6% at the fiscal third-quarter end, down from 29.6% at the fiscal 2023-end.
During the reported quarter, the company repurchased approximately 2.1 million shares at an average price of $118.57 per share for $245.9 million, bringing total repurchases to $427.1 million in the first nine months of fiscal 2024.
Fiscal Fourth-Quarter Guidance
Toll Brothers expects home deliveries of 3,275-3,375 units (indicating a solid growth from 2,755 units delivered in the prior-year quarter) at an average price of $940,000-$950,000 (suggesting a decline from $1,071,100 a year ago).
Adjusted home sales gross margin is expected to be 27.5%, implying a decline from 29.1% in the year-ago period. SG&A expenses are estimated to be 8.6% of home sales revenues, indicating a rise from 8.2% in the year-ago period. The company expects the effective tax rate to be 26%.
Fiscal 2024 Guidance Updated
For fiscal 2024, home deliveries are now anticipated to be in the range of 10,650-10,750 units (versus earlier expectations of 10,400-10,800 units). The estimated range reflects growth from 9,597 units in fiscal 2023. It still expects the period-end community count to be 410.
The average price of delivered homes is now expected to be $975,000 (versus the prior projection of $960,000-$970,000). The estimated range reflects a decrease from $1,027,900 reported in fiscal 2023.
Toll Brothers now expects an adjusted home sales gross margin of 28.3% compared with 28% expected earlier. This reflects a decline from 28.7% reported in fiscal 2023.
SG&A expenses, as a percentage of home sales revenues, are now projected to be 9.4% versus earlier expectations of 9.6% for fiscal 2024, still reflecting an increase from 9.2% reported in fiscal 2023.
For fiscal 2024, the company expects adjusted EPS between $14.50 and $14.75 compared with $12.36 generated a year ago.
The company expects the effective tax rate to be 25.4%, slightly below the previous anticipation of 25.5%. Return on beginning equity is expected to be approximately 22.5%.
TOL now expects approximately $600 million of share repurchases in fiscal 2024, up from $500 million expected earlier.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 6.54% due to these changes.
VGM Scores
Currently, Toll Brothers has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Toll Brothers has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.