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Toll Brothers (TOL) to Post Q4 Earnings: What's in Store?

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Toll Brothers, Inc. (TOL - Free Report) is scheduled to report fourth-quarter fiscal 2021 results (ended on Oct 31, 2021) on Dec 7, after the closing bell.

In the last reported quarter, the company’s earnings and revenues surpassed the Zacks Consensus Estimate by 23% and 1.7%, respectively. The said metrics also increased 74.4% and 26.8%, respectively, from the prior year on the back of higher deliveries and prices.

Encouragingly, earnings topped analysts’ expectations in 14 of the trailing 15 quarters.

Trend in Estimate Revision

The Zacks Consensus Estimate for fiscal fourth-quarter earnings has been revised downward over the past 30 days to $2.48 per share from $2.52. The said figure indicates a 60% increase from the year-ago earnings of $1.55 per share. The consensus mark for revenues is $2.91 billion, suggesting a 14.5% year-over-year rise.

Toll Brothers Inc. Price and EPS Surprise

Toll Brothers Inc. Price and EPS Surprise

Toll Brothers Inc. price-eps-surprise | Toll Brothers Inc. Quote

Factors to Note

Home sales of this luxury homebuilding company are expected to have increased in the fiscal fourth quarter from the year-ago level, given resilient housing market conditions in the United States, backed by historically low mortgage rates, lack of available supply and a highly motivated buyer.

Also, its focus on luxury move-up buyers — who already possess a residence and are looking for a shift to larger and better homes — has been commendable. Toll Brothers has been enjoying greater pricing power than other homebuilding companies as these homebuyers are less sensitive to price changes.

During the fiscal third-quarter earnings call, the company highlighted that it expects home deliveries for the quarter to be 3,450 units (indicating an improvement from 2,940 units delivered in the prior-year quarter) at an average selling price or ASP of $840,000. ASP in the year-ago quarter was $849,000.

Toll Brothers expects adjusted home sales gross margin of 25.6%, implying a rise from 24% recorded in the year-ago period. SG&A expenses, as a percentage of home sales revenues, are projected at 9.8% (indicating a decrease from the year-ago figure of 9.9%).

Meanwhile, higher land, labor and raw material costs are expected to have put pressure on fiscal fourth-quarter margins. Sustained supply-chain disruptions in the industry are expected to have reflected in the company’s performance.

Estimates

The Zacks Consensus Estimate for backlog is pegged at 10,162 units, indicating growth of 30.4% year over year. The same for average price for these backlog is pegged at $859,000, implying a rise from the year-ago figure of $818,000. The consensus estimate for net signed contracts is pegged at 2,963 units. This indicates a decline from the prior-year figure of 3,407 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 -9.38%. 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 #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Top-Ranked Stocks From the Same Industry:

Beazer Homes USA, Inc. (BZH - Free Report) currently sports a Zacks Rank #1. This Atlanta-based homebuilder continues to gain from strong operational execution and persistent strength in the housing market.

Beazer Homes has gained 38.2% year to date (YTD), faring better than the industry’s 29.6% rally. Earnings are expected to grow 23.7% in fiscal 2022.

TRI Pointe Group Inc. (TPH - Free Report) currently sports a Zacks Rank #1. This Irvine, CA-based homebuilder designs, constructs, and sells single-family detached and attached homes in the United States. Robust demand and pricing as well as improved operating leverage have been driving TRI Pointe's performance. Cost-cutting initiatives implemented earlier this year and focus on entry-level buyers have been adding to the positives.

TRI Pointe has gained 50.6% YTD. Earnings for 2021 and 2022 are expected to grow 80.2% and 9.6%, respectively.

Meritage Homes Corporation (MTH - Free Report) : Meritage Homes also carries a Zacks Rank #1. Based in Scottsdale, AZ, Meritage Homes is one of the leading designers and builders of single-family homes. Its focus on entry-level LiVE.NOW homes has been a major driving factor.

Meritage Homes has gained 42.4% YTD. Earnings are expected to grow 74.4% in 2021 and 22.2% for the next.

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