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Shares of Toll Brothers, Inc. (TOL - Free Report) fell more than 7% on Dec 5 after it announced its fourth-quarter fiscal 2017 results, wherein it failed to meet the consensus estimates for both top and bottom lines.
The country’s leading luxury homes builder reported adjusted earnings of $1.17 per share in the final quarter of fiscal 2017, falling shy of the Zacks Consensus Estimate of $1.19 by 1.7%. That said, the homebuilder’s reported earnings got a major boost from the year-ago profit level by 74.6%.
The company reported revenues of $2.03 billion in the fiscal fourth quarter, missing the consensus mark of $2.08 billion. Revenues, however, increased 9% year over year.
Although the company exhibited robust quarterly results, investors reacted negatively, mirroring concerns to home sales prices that were lower than what the company had expected. Additionally, Toll Brothers stated that it believes that home sale prices will further suffer and have an adverse year-over-year impact on adjusted gross margin.
Toll Brothers Inc. Price, Consensus and EPS Surprise
Toll Brothers operates under two segments – Traditional Home Building and Urban Infill ("City Living").
Traditional Home Building revenues during the quarter totaled $1.8 billion, down 0.2% year over year, while Urban Infill revenues of $190 million increased significantly from $13.9 million a year ago, courtesy of a higher number of homes delivered.
Inside the Headline Numbers
Consolidated homebuilding deliveries increased 9% year over year to 2,424 units in the quarter. Deliveries increased across all the regions (baring North), i.e., Mid-Atlantic, South and West. North registered 26.4% decline in deliveries.
Average price of homes delivered was $836,600 in the quarter, almost flat from the year-ago level of $834,300.
The number of net signed contracts was 1,979 units in the quarter, up 15% year over year. Value of net signed contracts during the quarter was $1.75 billion, reflecting an increase of 20% year over year. This marks the 13th consecutive quarter of year-over-year growth in contracts.
At the end of fiscal 2017, Toll Brothers had a backlog of 5,851 homes, up 25% year over year. Potential housing revenues from backlog grew 27% year over year to $5.06 billion. The average price of backlog was $865,100 compared with $850,400 in the prior-year quarter.
The company’s homebuilding adjusted gross margin expanded 40 basis points (bps) to 25.3% in the quarter under review.
As a percentage of revenues, SG&A expenses increased 20 bps to 8.3% from 8.1% in the fourth quarter of fiscal 2016.
Financials
Toll Brothers had $712.8 million in cash as on Oct 31, 2017 compared with $633.7 million as on Oct 31, 2016.
During the fourth quarter, Toll Brothers repurchased approximately 5.2 million shares of its common stock at an average price of $38.48 per share for a total purchase price of approximately $200.2 million.
Fiscal 2017 Highlights
The company’s total revenues increased 12% year over to $5.82 billion. Deliveries were 7,151 units, up 17%. Earnings came in at $3.17 per share, up 45.4% year over year.
Q1 FY 2018 Guidance
The company expects home deliveries between 1,300 and 1,500 units at an average price of $820,000 to $840,000.
Adjusted gross margin in the quarter is expected to be approximately 23.3%, implying a decline of 200 bps sequentially and 160 bps year over year.
SG&A expenses are estimated at approximately 13.3% of revenues.
Fiscal 2018 Guidance
Home deliveries are anticipated in the range of 7,700-8,700 units at an average price of $810,000-$860,000.
Revenues are projected between $6.24 billion and $7.48 billion for fiscal 2018 compared with $5.81 billion in fiscal 2017.
Toll Brothers expects adjusted gross margin in the range of 23.75-24.25%. SG&A expenses are estimated at approximately 10% of revenues.
Full-year 2017 and 2018 earnings for NVR are expected to increase 42.5% and 16.8%, respectively.
TRI Pointe Group is likely to witness earnings growth of 12.5% for 2017 and 14.9% for 2018.
D.R. Horton is likely to register earnings growth of 17.4% this year and 14.6% for the next.
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Toll Brothers (TOL) Q4 Earnings & Revenues Miss, Stock Falls
Shares of Toll Brothers, Inc. (TOL - Free Report) fell more than 7% on Dec 5 after it announced its fourth-quarter fiscal 2017 results, wherein it failed to meet the consensus estimates for both top and bottom lines.
The country’s leading luxury homes builder reported adjusted earnings of $1.17 per share in the final quarter of fiscal 2017, falling shy of the Zacks Consensus Estimate of $1.19 by 1.7%. That said, the homebuilder’s reported earnings got a major boost from the year-ago profit level by 74.6%.
The company reported revenues of $2.03 billion in the fiscal fourth quarter, missing the consensus mark of $2.08 billion. Revenues, however, increased 9% year over year.
Although the company exhibited robust quarterly results, investors reacted negatively, mirroring concerns to home sales prices that were lower than what the company had expected. Additionally, Toll Brothers stated that it believes that home sale prices will further suffer and have an adverse year-over-year impact on adjusted gross margin.
Toll Brothers Inc. Price, Consensus and EPS Surprise
Toll Brothers Inc. Price, Consensus and EPS Surprise | Toll Brothers Inc. Quote
Quarter Detail
Toll Brothers operates under two segments – Traditional Home Building and Urban Infill ("City Living").
Traditional Home Building revenues during the quarter totaled $1.8 billion, down 0.2% year over year, while Urban Infill revenues of $190 million increased significantly from $13.9 million a year ago, courtesy of a higher number of homes delivered.
Inside the Headline Numbers
Consolidated homebuilding deliveries increased 9% year over year to 2,424 units in the quarter. Deliveries increased across all the regions (baring North), i.e., Mid-Atlantic, South and West. North registered 26.4% decline in deliveries.
Average price of homes delivered was $836,600 in the quarter, almost flat from the year-ago level of $834,300.
The number of net signed contracts was 1,979 units in the quarter, up 15% year over year. Value of net signed contracts during the quarter was $1.75 billion, reflecting an increase of 20% year over year. This marks the 13th consecutive quarter of year-over-year growth in contracts.
At the end of fiscal 2017, Toll Brothers had a backlog of 5,851 homes, up 25% year over year. Potential housing revenues from backlog grew 27% year over year to $5.06 billion. The average price of backlog was $865,100 compared with $850,400 in the prior-year quarter.
The company’s homebuilding adjusted gross margin expanded 40 basis points (bps) to 25.3% in the quarter under review.
As a percentage of revenues, SG&A expenses increased 20 bps to 8.3% from 8.1% in the fourth quarter of fiscal 2016.
Financials
Toll Brothers had $712.8 million in cash as on Oct 31, 2017 compared with $633.7 million as on Oct 31, 2016.
During the fourth quarter, Toll Brothers repurchased approximately 5.2 million shares of its common stock at an average price of $38.48 per share for a total purchase price of approximately $200.2 million.
Fiscal 2017 Highlights
The company’s total revenues increased 12% year over to $5.82 billion. Deliveries were 7,151 units, up 17%. Earnings came in at $3.17 per share, up 45.4% year over year.
Q1 FY 2018 Guidance
The company expects home deliveries between 1,300 and 1,500 units at an average price of $820,000 to $840,000.
Adjusted gross margin in the quarter is expected to be approximately 23.3%, implying a decline of 200 bps sequentially and 160 bps year over year.
SG&A expenses are estimated at approximately 13.3% of revenues.
Fiscal 2018 Guidance
Home deliveries are anticipated in the range of 7,700-8,700 units at an average price of $810,000-$860,000.
Revenues are projected between $6.24 billion and $7.48 billion for fiscal 2018 compared with $5.81 billion in fiscal 2017.
Toll Brothers expects adjusted gross margin in the range of 23.75-24.25%. SG&A expenses are estimated at approximately 10% of revenues.
Zacks Rank & Stocks to Consider
Toll Brothers carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the industry are NVR Inc. (NVR - Free Report) and TRI Pointe Group, Inc. (TPH - Free Report) , each sporting a Zacks Rank #1 (Strong Buy), and D.R. Horton, Inc. (DHI - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Full-year 2017 and 2018 earnings for NVR are expected to increase 42.5% and 16.8%, respectively.
TRI Pointe Group is likely to witness earnings growth of 12.5% for 2017 and 14.9% for 2018.
D.R. Horton is likely to register earnings growth of 17.4% this year and 14.6% for the next.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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