We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why Investors Should Avoid Toll Brothers (TOL) Now
Read MoreHide Full Article
The year 2018 has been a disappointing for the Building Products – Home Builders industry and Toll Brothers, Inc. (TOL - Free Report) is no exception. Year to date, the stock has decreased 30.9% compared with the industry’s collective decline of 35.8%.
Apart from Toll Brothers, homebuilders like PulteGroup, Inc. (PHM - Free Report) , Lennar Corporation (LEN - Free Report) , D.R. Horton, Inc. (DHI - Free Report) and KB Home (KBH - Free Report) have suffered this year. Let’s focus on Toll Brothers and find out what is hurting the stock.
Decline in New Order: A Major Concern
Despite reporting better-than-expected results in fourth-quarter fiscal 2018, investors sentiment was hurt by decline in new orders. In the reported quarter, this Zacks Rank #4 (Sell) company’s new order declined for the first time in four years. Contracts in the quarter decreased 15% in dollars and 13% in units. Notably, California witnessed the biggest decline in contracts. Per community, contracts fell to 5.8 in the fourth quarter compared with 10.4 in the prior-year quarter.
Headwinds like rising interest rates and higher home prices in the housing market might have hurt investors’ sentiments. For first-quarter fiscal 2019, the company expects home deliveries between 1,350 units and 1,550 units (1,423 units were delivered in the prior-year quarter) at average price of $850,000-$880,000 (versus $826,000 a year ago).
Material Costs Woes Linger
Increasing building materials and labor costs are hurting the company’s margin significantly. Land prices are inflating due to limited availability. This, in turn, might dent homebuilders’ margins in the forthcoming quarters. Moreover, the recently imposed tariff on imported steel and imported aluminum raises concern. An increase in import tariff will escalate raw material cost for home builders, who are already grappling with increased cost, thanks to the recent imposition of lumber tariff.
Supply Constraints
Several years of production deficits during the housing downturn limited the supply of both rental and new homes in the country. At present, a shortage of buildable lots, skilled labor and available capital for smaller builders are limiting home production, thereby lowering the inventory of homes, both new and existing.
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
Here's Why Investors Should Avoid Toll Brothers (TOL) Now
The year 2018 has been a disappointing for the Building Products – Home Builders industry and Toll Brothers, Inc. (TOL - Free Report) is no exception. Year to date, the stock has decreased 30.9% compared with the industry’s collective decline of 35.8%.
Apart from Toll Brothers, homebuilders like PulteGroup, Inc. (PHM - Free Report) , Lennar Corporation (LEN - Free Report) , D.R. Horton, Inc. (DHI - Free Report) and KB Home (KBH - Free Report) have suffered this year. Let’s focus on Toll Brothers and find out what is hurting the stock.
Decline in New Order: A Major Concern
Despite reporting better-than-expected results in fourth-quarter fiscal 2018, investors sentiment was hurt by decline in new orders. In the reported quarter, this Zacks Rank #4 (Sell) company’s new order declined for the first time in four years. Contracts in the quarter decreased 15% in dollars and 13% in units. Notably, California witnessed the biggest decline in contracts. Per community, contracts fell to 5.8 in the fourth quarter compared with 10.4 in the prior-year quarter.
Headwinds like rising interest rates and higher home prices in the housing market might have hurt investors’ sentiments. For first-quarter fiscal 2019, the company expects home deliveries between 1,350 units and 1,550 units (1,423 units were delivered in the prior-year quarter) at average price of $850,000-$880,000 (versus $826,000 a year ago).
Material Costs Woes Linger
Increasing building materials and labor costs are hurting the company’s margin significantly. Land prices are inflating due to limited availability. This, in turn, might dent homebuilders’ margins in the forthcoming quarters. Moreover, the recently imposed tariff on imported steel and imported aluminum raises concern. An increase in import tariff will escalate raw material cost for home builders, who are already grappling with increased cost, thanks to the recent imposition of lumber tariff.
Supply Constraints
Several years of production deficits during the housing downturn limited the supply of both rental and new homes in the country. At present, a shortage of buildable lots, skilled labor and available capital for smaller builders are limiting home production, thereby lowering the inventory of homes, both new and existing.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>