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Toll Brothers, Inc. (TOL - Free Report) , the nation’s leading luxury homes builder, reported adjusted earnings of 87 cents per share in the third quarter of fiscal 2017, comfortably beating the Zacks Consensus Estimate of 68 cents by 27.9%. Earnings also increased 42.6% year over year.
The company reported revenues of $1.5 billion in the fiscal third quarter, surpassing the consensus mark of $1.48 billion by 1.5%. Revenues were up 18% year over year.
Shares of Toll Brothers have gained 20.2% year to date. However, the company’s shares declined 2.6% on Aug 22, mirroring investors’ concerns surrounding the company’s slashed guidance for full-year 2017 adjusted gross margin. Toll Brothers cut the top end of its adjusted gross margin forecast for fiscal year 2017.
Again, Toll Brothers CFO Martin Connor said in a statement, “We had been prepared to increase the mid-point of our FY 2017 delivery guidance by 100 units, from a mid-point of 7,200 units to 7,300, but our full year delivery projection was negatively impacted by 150 homes which will now be delivered in FY 2018 due to the floor joist recall by a major lumber manufacturer that has affected many builders in the industry”.
Quarter Detail
Toll Brothers operates under two segments – Traditional Home Building and Urban Infill ("City Living").
Traditional Home Building revenues during the quarter totaled $1.4 billion, up 15.3% year over year, while Urban Infill revenues of $98.7 million increased 88%, courtesy of a higher number of homes delivered.
Inside the Headline Numbers
Consolidated homebuilding deliveries rose 2 6% year over year to 1,899 units in the third quarter of fiscal 2017. Deliveries increased across all the regions, i.e., North, Mid-Atlantic, South and West. However, California registered 4% decline in deliveries.
Average price of homes delivered was $791,400 in the quarter, down 6.1% year over year due to changes in the mix.
The number of net signed contracts was 2,163 units in the quarter, up 24% year over year. Value of net signed contracts during the quarter was $1.81 billion, reflecting an increase of 25% year over year. This marks the 12th consecutive quarter of year-over-year growth in contracts.
At the end of the fiscal third quarter, Toll Brothers had a backlog of 6,282 homes, up 21% year over year. Potential housing revenues from backlog grew 21% year over year to $5.31 billion. The average price of backlog was $845,100 in the third quarter compared with $844,300 in the prior-year quarter.
The company’s homebuilding adjusted gross margin declined 30 basis points (bps) to 25% in the quarter under review.
As a percentage of revenues, SG&A expenses contracted 30 bps to 10.3% from 10.6% in the third quarter of fiscal 2016.
Financials
Toll Brothers had $946.2 million in cash as on Jul 31, 2017 compared with $633.7 million as on Oct 31, 2016.
During the third quarter, Toll Brothers repurchased approximately 1.9 million shares of its common stock at an average price of $39.02 per share for a total purchase price of approximately $75.3 million.
Fourth-Quarter Outlook
The company expects home deliveries between 2,275 and 2,575 units at an average price of $840,000 to $860,000.
Adjusted gross margin in the quarter is expected to improve by 35-50 bps year over year.
Third-quarter fiscal 2017 SG&A expenses are estimated at approximately 8% of revenues. Effective tax rate is expected to be approximately 38%.
Fiscal 2017 Outlook
For fiscal 2017, home deliveries are anticipated in the range of 7,000 to 7,300 units (previously 6,950-7,450) at an average price of $800,000-$825,000.
Revenues are projected between $5.6 billion and $6 billion (previously $5.4-$6.1 billion) for fiscal 2017, compared with $5.17 billion in fiscal 2016.
Toll Brothers expects its adjusted gross margin in the range of 24.8-25% (previously 24.8-25.3%) band for fiscal 2017. SG&A expenses are estimated at approximately 10.4% of revenues.
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Toll Brothers (TOL) Tops Q3 Earnings, Updates 2017 View
Toll Brothers, Inc. (TOL - Free Report) , the nation’s leading luxury homes builder, reported adjusted earnings of 87 cents per share in the third quarter of fiscal 2017, comfortably beating the Zacks Consensus Estimate of 68 cents by 27.9%. Earnings also increased 42.6% year over year.
The company reported revenues of $1.5 billion in the fiscal third quarter, surpassing the consensus mark of $1.48 billion by 1.5%. Revenues were up 18% year over year.
Shares of Toll Brothers have gained 20.2% year to date. However, the company’s shares declined 2.6% on Aug 22, mirroring investors’ concerns surrounding the company’s slashed guidance for full-year 2017 adjusted gross margin. Toll Brothers cut the top end of its adjusted gross margin forecast for fiscal year 2017.
Again, Toll Brothers CFO Martin Connor said in a statement, “We had been prepared to increase the mid-point of our FY 2017 delivery guidance by 100 units, from a mid-point of 7,200 units to 7,300, but our full year delivery projection was negatively impacted by 150 homes which will now be delivered in FY 2018 due to the floor joist recall by a major lumber manufacturer that has affected many builders in the industry”.
Quarter Detail
Toll Brothers operates under two segments – Traditional Home Building and Urban Infill ("City Living").
Traditional Home Building revenues during the quarter totaled $1.4 billion, up 15.3% year over year, while Urban Infill revenues of $98.7 million increased 88%, courtesy of a higher number of homes delivered.
Inside the Headline Numbers
Consolidated homebuilding deliveries rose 2 6% year over year to 1,899 units in the third quarter of fiscal 2017. Deliveries increased across all the regions, i.e., North, Mid-Atlantic, South and West. However, California registered 4% decline in deliveries.
Average price of homes delivered was $791,400 in the quarter, down 6.1% year over year due to changes in the mix.
The number of net signed contracts was 2,163 units in the quarter, up 24% year over year. Value of net signed contracts during the quarter was $1.81 billion, reflecting an increase of 25% year over year. This marks the 12th consecutive quarter of year-over-year growth in contracts.
At the end of the fiscal third quarter, Toll Brothers had a backlog of 6,282 homes, up 21% year over year. Potential housing revenues from backlog grew 21% year over year to $5.31 billion. The average price of backlog was $845,100 in the third quarter compared with $844,300 in the prior-year quarter.
The company’s homebuilding adjusted gross margin declined 30 basis points (bps) to 25% in the quarter under review.
As a percentage of revenues, SG&A expenses contracted 30 bps to 10.3% from 10.6% in the third quarter of fiscal 2016.
Financials
Toll Brothers had $946.2 million in cash as on Jul 31, 2017 compared with $633.7 million as on Oct 31, 2016.
During the third quarter, Toll Brothers repurchased approximately 1.9 million shares of its common stock at an average price of $39.02 per share for a total purchase price of approximately $75.3 million.
Fourth-Quarter Outlook
The company expects home deliveries between 2,275 and 2,575 units at an average price of $840,000 to $860,000.
Adjusted gross margin in the quarter is expected to improve by 35-50 bps year over year.
Third-quarter fiscal 2017 SG&A expenses are estimated at approximately 8% of revenues. Effective tax rate is expected to be approximately 38%.
Fiscal 2017 Outlook
For fiscal 2017, home deliveries are anticipated in the range of 7,000 to 7,300 units (previously 6,950-7,450) at an average price of $800,000-$825,000.
Revenues are projected between $5.6 billion and $6 billion (previously $5.4-$6.1 billion) for fiscal 2017, compared with $5.17 billion in fiscal 2016.
Toll Brothers expects its adjusted gross margin in the range of 24.8-25% (previously 24.8-25.3%) band for fiscal 2017. SG&A expenses are estimated at approximately 10.4% of revenues.
Zacks Rank & Stocks to Consider
Toll Brothers carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the industry include KB Home (KBH - Free Report) and NVR Inc. (NVR - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and M/I Homes, Inc. (MHO - Free Report) , with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Full-year 2017 earnings for KB Home are expected to increase 51.7% while that of NVR is likely to rise 33.9%.
M/I Homes is expected to witness 37.1% growth in this year’s earnings.
Toll Brothers Inc. Price, Consensus and EPS Surprise
Toll Brothers Inc. Price, Consensus and EPS Surprise | Toll Brothers Inc. Quote
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