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Toll Brothers, Inc. (TOL - Free Report) reported first-quarter fiscal 2023 (ended Jan 31, 2023). Both the top and bottom lines topped the Zacks Consensus Estimate and the company delivered strong quarterly earnings and improved gross margin for the quarter despite the ongoing challenges in the industry. The homebuilder has been witnessing higher demand beyond normal seasonality, given the improving buyer confidence.
Shares of this leading luxury homebuilder gained 2.4% in the after-hours trading session on Feb 21, following the release.
Looking forward, Douglas C. Yearley, Jr., chairman and chief executive officer, said, “We believe the recent pick-up in demand is a sign that the long-term fundamentals underpinning the housing market remain intact. These include favorable demographic and migration trends, a very tight resale market, and growing pent-up demand resulting from over a decade of underproduction. Notwithstanding near-term uncertainty in the economy, we expect these factors will continue to support the housing market well into the future.”
With a solid balance sheet and ample liquidity, TOL expects to generate significant cash flow from operations in fiscal 2023 and reaffirmed its guidance for this fiscal year.
Toll Brothers Inc. Price, Consensus and EPS Surprise
This Fort Washington, PA-based homebuilder reported adjusted earnings of $1.70 per share, which beat the Zacks Consensus Estimate of $1.37 by 24.1% and increased 37.1% from the year-ago period.
Total revenues (including Home sales and Land sales and others) came in at $1.78 billion, which beat the consensus mark of $1.74 billion by 2.2% but declined slightly by 0.6% year over year.
Inside the Headlines
The company’s total home sales revenues grew 3.7% from the prior-year quarter to $1.75 billion. Homes delivered were down 5% year over year to 1,826 units. Deliveries decreased across all the geographic regions served by the company barring South. The average price of homes delivered was $958,300 for the quarter, up from the year-ago level of $875,500.
The number of net signed contracts for the reported quarter was 1,461 units, down 50% year over year. The value of net signed contracts was $1.5 billion, reflecting a decrease of 51%.
At the fiscal first-quarter end, Toll Brothers had a backlog of 7,733 homes, representing a year-over-year decrease of 32%. Also, potential revenues from backlog declined 21% year over year to $8.6 billion. The average price of homes in backlog totaled $1,110,200, up from $956,000 a year ago.
The cancelation rate (as a percentage of signed contracts) for the reported quarter was 14.3% compared with 4.8% in the prior-year period.
Margins
The company’s adjusted home sales gross margin was 27.5%, expanding 190 basis points (bps) for the quarter. SG&A expenses — as a percentage of home sales revenues — were 12.1%, which decreased 130 bps from the year-ago quarter.
Financials
Toll Brothers had cash and cash equivalents of $791.6 million at the end of first-quarter fiscal 2023 compared with $1,346.8 million at the fiscal 2022-end. At the fiscal first-quarter end, it had $1.8 billion available under the $1.9 billion bank revolving credit facility, scheduled to mature in February 2028.
Total debt at the fiscal first-quarter end was $3.21 billion, down from $3.33 billion at the fiscal 2022-end. Debt to capital was 34.1% at the fiscal first-quarter end, down from 37.5% at the fiscal 2022-end. During the quarter, the company repurchased 187,300 million shares of its common stock at an average price of $49.95 per share for approximately $9.4 million.
Fiscal Second-Quarter Guidance
Toll Brothers expects home deliveries of 2,050-2,150 units (indicating a decrease from 2,407 units delivered in the prior-year quarter) at an average price of $980,000-$1,00,000 (suggesting a rise from $908,400 a year ago).
Adjusted home sales gross margin is expected to be 27%, implying an increase from 26.1% in the year-ago period. SG&A expenses are estimated to be 11.2% of home sales revenues, indicating a slight rise from 11.1% in the year-ago period. The company expects the effective tax rate to be 26%.
Fiscal 2023 Guidance
For fiscal 2023, home deliveries are anticipated to be 8,000-9,000 units (down from 10,515 units in fiscal 2022) at an average price of $965,000-$985,000 (up from $923,600 in fiscal 2022). Toll Brothers expects an adjusted home sales gross margin of 27% compared with 27.5% reported in fiscal 2022. SG&A expenses, as a percentage of home sales revenues, for fiscal 2023 are projected to be 11% versus 10.1% reported in fiscal 2022.
Meritage Homes Corporation (MTH - Free Report) reported impressive results for fourth-quarter 2022, where earnings and total closing revenues surpassed the Zacks Consensus Estimate. The metrics also rose from the year-ago quarter’s levels, thanks to higher volumes and pricing.
MTH’s quarterly earnings of $7.09 per share topped the Zacks Consensus Estimate of $7.03 by 0.9% and increased by 13% year over year from $6.25 posted a year ago. The uptrend was due to higher home closing revenue, improved overhead leverage and a lower outstanding share count.
D.R. Horton, Inc. (DHI - Free Report) reported first-quarter fiscal 2023 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.
DHI’s chairman of the board, Donald R. Horton, said, “Beginning in June 2022 and continuing through today, we have seen a moderation in housing demand caused by significant increases in mortgage interest rates and general economic uncertainty. While these pressures may persist for some time, the supply of both new and existing homes at affordable price points remains limited and demographics supporting housing demand remain favorable.”
NVR, Inc. (NVR - Free Report) reported fourth-quarter 2022 results, wherein this homebuilding and mortgage banking company’s earnings and revenues beat the Zacks Consensus Estimate.
NVR reported earnings of $133.44 per share, which surpassed the consensus mark of $104.10 by 28.2%. The reported figure increased 49.8% from the prior-year quarter’s figure of $89.09 per share.
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Toll Brothers (TOL) Stock Rises on Q1 Earnings & Revenue Beat
Toll Brothers, Inc. (TOL - Free Report) reported first-quarter fiscal 2023 (ended Jan 31, 2023). Both the top and bottom lines topped the Zacks Consensus Estimate and the company delivered strong quarterly earnings and improved gross margin for the quarter despite the ongoing challenges in the industry. The homebuilder has been witnessing higher demand beyond normal seasonality, given the improving buyer confidence.
Shares of this leading luxury homebuilder gained 2.4% in the after-hours trading session on Feb 21, following the release.
Looking forward, Douglas C. Yearley, Jr., chairman and chief executive officer, said, “We believe the recent pick-up in demand is a sign that the long-term fundamentals underpinning the housing market remain intact. These include favorable demographic and migration trends, a very tight resale market, and growing pent-up demand resulting from over a decade of underproduction. Notwithstanding near-term uncertainty in the economy, we expect these factors will continue to support the housing market well into the future.”
With a solid balance sheet and ample liquidity, TOL expects to generate significant cash flow from operations in fiscal 2023 and reaffirmed its guidance for this fiscal year.
Toll Brothers Inc. Price, Consensus and EPS Surprise
Toll Brothers Inc. price-consensus-eps-surprise-chart | Toll Brothers Inc. Quote
Earnings & Revenue Discussion
This Fort Washington, PA-based homebuilder reported adjusted earnings of $1.70 per share, which beat the Zacks Consensus Estimate of $1.37 by 24.1% and increased 37.1% from the year-ago period.
Total revenues (including Home sales and Land sales and others) came in at $1.78 billion, which beat the consensus mark of $1.74 billion by 2.2% but declined slightly by 0.6% year over year.
Inside the Headlines
The company’s total home sales revenues grew 3.7% from the prior-year quarter to $1.75 billion. Homes delivered were down 5% year over year to 1,826 units. Deliveries decreased across all the geographic regions served by the company barring South. The average price of homes delivered was $958,300 for the quarter, up from the year-ago level of $875,500.
The number of net signed contracts for the reported quarter was 1,461 units, down 50% year over year. The value of net signed contracts was $1.5 billion, reflecting a decrease of 51%.
At the fiscal first-quarter end, Toll Brothers had a backlog of 7,733 homes, representing a year-over-year decrease of 32%. Also, potential revenues from backlog declined 21% year over year to $8.6 billion. The average price of homes in backlog totaled $1,110,200, up from $956,000 a year ago.
The cancelation rate (as a percentage of signed contracts) for the reported quarter was 14.3% compared with 4.8% in the prior-year period.
Margins
The company’s adjusted home sales gross margin was 27.5%, expanding 190 basis points (bps) for the quarter. SG&A expenses — as a percentage of home sales revenues — were 12.1%, which decreased 130 bps from the year-ago quarter.
Financials
Toll Brothers had cash and cash equivalents of $791.6 million at the end of first-quarter fiscal 2023 compared with $1,346.8 million at the fiscal 2022-end. At the fiscal first-quarter end, it had $1.8 billion available under the $1.9 billion bank revolving credit facility, scheduled to mature in February 2028.
Total debt at the fiscal first-quarter end was $3.21 billion, down from $3.33 billion at the fiscal 2022-end. Debt to capital was 34.1% at the fiscal first-quarter end, down from 37.5% at the fiscal 2022-end. During the quarter, the company repurchased 187,300 million shares of its common stock at an average price of $49.95 per share for approximately $9.4 million.
Fiscal Second-Quarter Guidance
Toll Brothers expects home deliveries of 2,050-2,150 units (indicating a decrease from 2,407 units delivered in the prior-year quarter) at an average price of $980,000-$1,00,000 (suggesting a rise from $908,400 a year ago).
Adjusted home sales gross margin is expected to be 27%, implying an increase from 26.1% in the year-ago period. SG&A expenses are estimated to be 11.2% of home sales revenues, indicating a slight rise from 11.1% in the year-ago period. The company expects the effective tax rate to be 26%.
Fiscal 2023 Guidance
For fiscal 2023, home deliveries are anticipated to be 8,000-9,000 units (down from 10,515 units in fiscal 2022) at an average price of $965,000-$985,000 (up from $923,600 in fiscal 2022). Toll Brothers expects an adjusted home sales gross margin of 27% compared with 27.5% reported in fiscal 2022. SG&A expenses, as a percentage of home sales revenues, for fiscal 2023 are projected to be 11% versus 10.1% reported in fiscal 2022.
Zacks Rank
Toll Brothers currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Construction Releases
Meritage Homes Corporation (MTH - Free Report) reported impressive results for fourth-quarter 2022, where earnings and total closing revenues surpassed the Zacks Consensus Estimate. The metrics also rose from the year-ago quarter’s levels, thanks to higher volumes and pricing.
MTH’s quarterly earnings of $7.09 per share topped the Zacks Consensus Estimate of $7.03 by 0.9% and increased by 13% year over year from $6.25 posted a year ago. The uptrend was due to higher home closing revenue, improved overhead leverage and a lower outstanding share count.
D.R. Horton, Inc. (DHI - Free Report) reported first-quarter fiscal 2023 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.
DHI’s chairman of the board, Donald R. Horton, said, “Beginning in June 2022 and continuing through today, we have seen a moderation in housing demand caused by significant increases in mortgage interest rates and general economic uncertainty. While these pressures may persist for some time, the supply of both new and existing homes at affordable price points remains limited and demographics supporting housing demand remain favorable.”
NVR, Inc. (NVR - Free Report) reported fourth-quarter 2022 results, wherein this homebuilding and mortgage banking company’s earnings and revenues beat the Zacks Consensus Estimate.
NVR reported earnings of $133.44 per share, which surpassed the consensus mark of $104.10 by 28.2%. The reported figure increased 49.8% from the prior-year quarter’s figure of $89.09 per share.