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Toll Brothers, Inc. (TOL - Free Report) reported second-quarter fiscal 2023 (ended Apr 30, 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 company’s quarterly results reflected stabilized mortgage rates and improved buyer confidence, resulting in higher demand for homes. This, combined with its policy of boosting its supply of spec homes into the spring selling season and focus on operational efficiency, has helped the company to deliver solid fiscal second-quarter results.
This recovering demand environment also helped the company to lift its guidance for fiscal 2023.
Shares of this leading luxury homebuilder gained 3.5% in the after-hours trading session on May 23, following the release.
Toll Brothers Inc. Price, Consensus and EPS Surprise
This Fort Washington, PA-based homebuilder reported adjusted earnings of $2.85 per share, which beat the Zacks Consensus Estimate of $1.89 by 50.9% and increased 54.1% from the year-ago period.
Total revenues (including Home sales and Land sales and others) came in at $2.5 billion, which beat the consensus mark of $2.07 billion by 21.3% and increased 10.1% year over year.
Inside the Headlines
The company’s total home sales revenues grew 13.9% from the prior-year quarter to $2.49 billion. Homes delivered were up 4% year over year to 2,492 units. Deliveries increased across South and Pacific geographic regions served by the company. The average price of homes delivered was $999,300 for the quarter, up from the year-ago level of $909,200.
The number of net signed contracts for the reported quarter was 2,333 units, down 18.8% year over year. The value of net signed contracts was $2.28 billion, reflecting a decrease of 26.4%.
At the fiscal second-quarter end, Toll Brothers had a backlog of 7,574 homes, representing a year-over-year decrease of 36%. Also, potential revenues from backlog declined 28% year over year to $8.4 billion. The average price of homes in backlog totaled $1,105,900, up from $994,700 a year ago.
The cancelation rate (as a percentage of signed contracts) for the reported quarter was 11.5% compared with 3.8% in the prior-year period.
Margins
The company’s adjusted home sales gross margin was 28.3%, expanding 220 basis points (bps) for the quarter. SG&A expenses — as a percentage of home sales revenues — were 9.1%, which decreased 200 bps from the year-ago quarter.
Financials
Toll Brothers had cash and cash equivalents of $761.9 million at the end of second-quarter fiscal 2023 compared with $1,346.8 million at the fiscal 2022-end. At the fiscal second-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 second-quarter end was $2.83 billion, down from $3.33 billion at the fiscal 2022-end. Debt to capital was 30.6% at the fiscal second-quarter end, down from 35.7% at the fiscal 2022-end. During the quarter, the company repurchased 1.4 million shares of its common stock at an average price of $58.14 per share for approximately $83.8 million.
During the quarter, the company hiked its quarterly cash dividend by 5% to 21 cents per share.
Fiscal Third-Quarter Guidance
Toll Brothers expects home deliveries of 2,350-2,450 units (indicating a decrease from 2,414 units delivered in the prior-year quarter) at an average price of $1,005,000-$1,025,000 (suggesting a rise from $934,700 a year ago).
Adjusted home sales gross margin is expected to be 27.7%, implying an increase from 26% in the year-ago period. SG&A expenses are estimated to be 9.7% of home sales revenues, indicating a decline from 10.3% in the year-ago period. The company expects the effective tax rate to be 26%.
Fiscal 2023 Guidance Raised
For fiscal 2023, home deliveries are now anticipated to be in the range of 8,900-9,500 units versus 8,000-9,000 units expected earlier. The estimated range reflects a decline from 10,515 units in fiscal 2022. The average price is expected to be $975,000-$995,000 versus an earlier projection of $965,000-$985,000. The estimated range reflects an increase from $923,600 reported in fiscal 2022.
Toll Brothers expects an adjusted home sales gross margin of 27.8% (versus 27% expected earlier) 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 10% versus 11% of earlier expectation. In the year-ago period, the metric was 10.1%. The company expects the effective tax rate to be 25.7%.
Quanta Services Inc. (PWR - Free Report) reported better-than-expected results for first-quarter 2023, wherein adjusted earnings and revenues surpassed the Zacks Consensus Estimate.
PWR has been experiencing high demand for infrastructure solutions that support energy transition initiatives, and increase reliability, safety and efficiency. Notably, project activities associated with renewable generation have been going strong and are expected to continue throughout the year.
KBR, Inc. (KBR - Free Report) reported strong results in first-quarter 2023, wherein earnings and revenues surpassed the Zacks Consensus Estimate and increased on a year-over-year basis.
KBR’s top and bottom lines gained on strong underlying growth and margin expansion, as well as excellent bookings in the reported quarter.
Fluor Corporation (FLR - Free Report) reported mixed results for first-quarter 2023. Earnings missed the Zacks Consensus Estimate but increased from the previous year. Revenues surpassed the consensus mark and grew from the year-ago level.
For 2023, FLR still expects adjusted earnings per share in the range of $1.50-$1.90 per share. It expects adjusted EBITDA in the range of $450-$600 million.
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Toll Brothers (TOL) Stock Rises on Q2 Earnings & Revenue Beat
Toll Brothers, Inc. (TOL - Free Report) reported second-quarter fiscal 2023 (ended Apr 30, 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 company’s quarterly results reflected stabilized mortgage rates and improved buyer confidence, resulting in higher demand for homes. This, combined with its policy of boosting its supply of spec homes into the spring selling season and focus on operational efficiency, has helped the company to deliver solid fiscal second-quarter results.
This recovering demand environment also helped the company to lift its guidance for fiscal 2023.
Shares of this leading luxury homebuilder gained 3.5% in the after-hours trading session on May 23, following the release.
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 $2.85 per share, which beat the Zacks Consensus Estimate of $1.89 by 50.9% and increased 54.1% from the year-ago period.
Total revenues (including Home sales and Land sales and others) came in at $2.5 billion, which beat the consensus mark of $2.07 billion by 21.3% and increased 10.1% year over year.
Inside the Headlines
The company’s total home sales revenues grew 13.9% from the prior-year quarter to $2.49 billion. Homes delivered were up 4% year over year to 2,492 units. Deliveries increased across South and Pacific geographic regions served by the company. The average price of homes delivered was $999,300 for the quarter, up from the year-ago level of $909,200.
The number of net signed contracts for the reported quarter was 2,333 units, down 18.8% year over year. The value of net signed contracts was $2.28 billion, reflecting a decrease of 26.4%.
At the fiscal second-quarter end, Toll Brothers had a backlog of 7,574 homes, representing a year-over-year decrease of 36%. Also, potential revenues from backlog declined 28% year over year to $8.4 billion. The average price of homes in backlog totaled $1,105,900, up from $994,700 a year ago.
The cancelation rate (as a percentage of signed contracts) for the reported quarter was 11.5% compared with 3.8% in the prior-year period.
Margins
The company’s adjusted home sales gross margin was 28.3%, expanding 220 basis points (bps) for the quarter. SG&A expenses — as a percentage of home sales revenues — were 9.1%, which decreased 200 bps from the year-ago quarter.
Financials
Toll Brothers had cash and cash equivalents of $761.9 million at the end of second-quarter fiscal 2023 compared with $1,346.8 million at the fiscal 2022-end. At the fiscal second-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 second-quarter end was $2.83 billion, down from $3.33 billion at the fiscal 2022-end. Debt to capital was 30.6% at the fiscal second-quarter end, down from 35.7% at the fiscal 2022-end. During the quarter, the company repurchased 1.4 million shares of its common stock at an average price of $58.14 per share for approximately $83.8 million.
During the quarter, the company hiked its quarterly cash dividend by 5% to 21 cents per share.
Fiscal Third-Quarter Guidance
Toll Brothers expects home deliveries of 2,350-2,450 units (indicating a decrease from 2,414 units delivered in the prior-year quarter) at an average price of $1,005,000-$1,025,000 (suggesting a rise from $934,700 a year ago).
Adjusted home sales gross margin is expected to be 27.7%, implying an increase from 26% in the year-ago period. SG&A expenses are estimated to be 9.7% of home sales revenues, indicating a decline from 10.3% in the year-ago period. The company expects the effective tax rate to be 26%.
Fiscal 2023 Guidance Raised
For fiscal 2023, home deliveries are now anticipated to be in the range of 8,900-9,500 units versus 8,000-9,000 units expected earlier. The estimated range reflects a decline from 10,515 units in fiscal 2022. The average price is expected to be $975,000-$995,000 versus an earlier projection of $965,000-$985,000. The estimated range reflects an increase from $923,600 reported in fiscal 2022.
Toll Brothers expects an adjusted home sales gross margin of 27.8% (versus 27% expected earlier) 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 10% versus 11% of earlier expectation. In the year-ago period, the metric was 10.1%. The company expects the effective tax rate to be 25.7%.
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
Quanta Services Inc. (PWR - Free Report) reported better-than-expected results for first-quarter 2023, wherein adjusted earnings and revenues surpassed the Zacks Consensus Estimate.
PWR has been experiencing high demand for infrastructure solutions that support energy transition initiatives, and increase reliability, safety and efficiency. Notably, project activities associated with renewable generation have been going strong and are expected to continue throughout the year.
KBR, Inc. (KBR - Free Report) reported strong results in first-quarter 2023, wherein earnings and revenues surpassed the Zacks Consensus Estimate and increased on a year-over-year basis.
KBR’s top and bottom lines gained on strong underlying growth and margin expansion, as well as excellent bookings in the reported quarter.
Fluor Corporation (FLR - Free Report) reported mixed results for first-quarter 2023. Earnings missed the Zacks Consensus Estimate but increased from the previous year. Revenues surpassed the consensus mark and grew from the year-ago level.
For 2023, FLR still expects adjusted earnings per share in the range of $1.50-$1.90 per share. It expects adjusted EBITDA in the range of $450-$600 million.