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In the last reported quarter, the company’s earnings and revenues surpassed the Zacks Consensus Estimate by 30.4% and 8.8%, respectively. Earnings increased 58.7% and revenues grew 7.7% from the prior-year period.
On an encouraging note, earnings topped analysts’ expectations in 22 of the 23 trailing quarters.
Trend in Estimate Revision
The Zacks Consensus Estimate for the fiscal fourth-quarter earnings per share (EPS) has remained unchanged at $3.64 over the past 60 days. The said figure indicates a 22.1% decline from the year-ago EPS of $4.67. The consensus mark for revenues is pegged at $2.78 billion, suggesting a 25.1% year-over-year decrease.
Toll Brothers’ fiscal fourth-quarter home sales are expected to have decreased from the year-ago reported level despite higher pricing due to ongoing challenges in the industry comprising a softer demand environment compared with the year-ago level. The increase in mortgage rates since March 2022, along with uncertain macroeconomic conditions, has been playing the spoilsport.
Nonetheless, low-existing homes for sale have been driving demand for new homes in the market. Although this tailwind is likely to have helped the company to post higher orders in the quarter, rising mortgage rates are headwinds.
Moreover, apart from the lack of available supply, its focus on luxury move-up buyers, who already possess a residence and are looking to shift to larger and better homes, will somewhat contribute to the revenues. Toll Brothers has been enjoying greater pricing power than other homebuilding companies, as homebuyers are less sensitive to price changes. The company has also been benefiting from the strategy of broadening its product lines, price points and geographies, along with spec sales.
On the fiscal third-quarter earnings call, TOL stated that it expects 2,650-2,750 units (indicating a decrease from 3,765 units delivered in the prior-year quarter) at an average price of $1,005,000-$1,025,000 (suggesting a rise from $951,100 a year ago). Our model predicts home sales revenues to decline 23.8% year over year to $2.73 billion.
Increased inflation and higher land, labor and raw material costs are expected to have put pressure on the fiscal fourth-quarter margins. That said, the company has been tightening its costs, which are expected to have reflected in its quarterly results.
Toll Brothers expects the adjusted home sales gross margin to be 28.5%, implying an increase from 29% reported in the year-ago period. SG&A expenses are estimated to be 8.8% of home sales revenues, indicating an increase from 7.7% reported in the year-ago period. The company expects the effective tax rate to be 26%. We expect the adjusted home sales gross margin to be 28.5% and SG&A expenses to be 8.8% of home sales.
Estimates
Our model predicts a backlog of 6,648 units, indicating a decline from 8,098 homes reported a year ago. The same for the backlog (in values) is pegged at $7,059.9 million, implying a decline from the $8,874.1 million recorded at the fourth quarter of fiscal 2022-end. We expect net signed contracts to be around 2,053 units. This indicates an improvement from the prior-year reported figure of 1,186 units.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict an earnings beat for Toll Brothers this time around. This 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, this 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 0.00%. 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 #4 (Sell).
Key Picks
Some better-ranked stocks in the Zacks Construction sector are:
GTES’ expected earnings growth rate for 2023 is 10.5%. The consensus mark for GTES’ 2023 earnings has moved north to $1.26 per share from $1.21 in the past 30 days.
Sterling Infrastructure, Inc. (STRL - Free Report) currently has a Zacks Rank #2. STRL delivered a trailing four-quarter earnings surprise of 12.2%, on average.
The Zacks Consensus Estimate for STRL’s 2023 sales and EPS indicates growth of 4.9% and 32.3%, respectively, from the previous year’s reported levels.
Willdan Group, Inc. (WLDN - Free Report) is a nationwide provider of professional, technical and consulting services to utilities, government agencies and private industry.
WLDN presently carries a Zacks Rank #2. Its expected earnings growth rate for 2023 is 50%.
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Toll Brothers (TOL) to Post Q4 Earnings: Here's What to Expect
Toll Brothers, Inc. (TOL - Free Report) is scheduled to report fourth-quarter fiscal 2023 (ended Oct 31, 2023) results on Dec 5, after the closing bell.
In the last reported quarter, the company’s earnings and revenues surpassed the Zacks Consensus Estimate by 30.4% and 8.8%, respectively. Earnings increased 58.7% and revenues grew 7.7% from the prior-year period.
On an encouraging note, earnings topped analysts’ expectations in 22 of the 23 trailing quarters.
Trend in Estimate Revision
The Zacks Consensus Estimate for the fiscal fourth-quarter earnings per share (EPS) has remained unchanged at $3.64 over the past 60 days. The said figure indicates a 22.1% decline from the year-ago EPS of $4.67. The consensus mark for revenues is pegged at $2.78 billion, suggesting a 25.1% year-over-year decrease.
Toll Brothers Inc. Price and EPS Surprise
Toll Brothers Inc. price-eps-surprise | Toll Brothers Inc. Quote
Factors to Note
Toll Brothers’ fiscal fourth-quarter home sales are expected to have decreased from the year-ago reported level despite higher pricing due to ongoing challenges in the industry comprising a softer demand environment compared with the year-ago level. The increase in mortgage rates since March 2022, along with uncertain macroeconomic conditions, has been playing the spoilsport.
Nonetheless, low-existing homes for sale have been driving demand for new homes in the market. Although this tailwind is likely to have helped the company to post higher orders in the quarter, rising mortgage rates are headwinds.
Moreover, apart from the lack of available supply, its focus on luxury move-up buyers, who already possess a residence and are looking to shift to larger and better homes, will somewhat contribute to the revenues. Toll Brothers has been enjoying greater pricing power than other homebuilding companies, as homebuyers are less sensitive to price changes. The company has also been benefiting from the strategy of broadening its product lines, price points and geographies, along with spec sales.
On the fiscal third-quarter earnings call, TOL stated that it expects 2,650-2,750 units (indicating a decrease from 3,765 units delivered in the prior-year quarter) at an average price of $1,005,000-$1,025,000 (suggesting a rise from $951,100 a year ago). Our model predicts home sales revenues to decline 23.8% year over year to $2.73 billion.
Increased inflation and higher land, labor and raw material costs are expected to have put pressure on the fiscal fourth-quarter margins. That said, the company has been tightening its costs, which are expected to have reflected in its quarterly results.
Toll Brothers expects the adjusted home sales gross margin to be 28.5%, implying an increase from 29% reported in the year-ago period. SG&A expenses are estimated to be 8.8% of home sales revenues, indicating an increase from 7.7% reported in the year-ago period. The company expects the effective tax rate to be 26%. We expect the adjusted home sales gross margin to be 28.5% and SG&A expenses to be 8.8% of home sales.
Estimates
Our model predicts a backlog of 6,648 units, indicating a decline from 8,098 homes reported a year ago. The same for the backlog (in values) is pegged at $7,059.9 million, implying a decline from the $8,874.1 million recorded at the fourth quarter of fiscal 2022-end. We expect net signed contracts to be around 2,053 units. This indicates an improvement from the prior-year reported figure of 1,186 units.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict an earnings beat for Toll Brothers this time around. This 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, this 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 0.00%. 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 #4 (Sell).
Key Picks
Some better-ranked stocks in the Zacks Construction sector are:
Gates Industrial Corporation plc (GTES - Free Report) manufactures engineered power transmission and fluid power solutions. GTES currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
GTES’ expected earnings growth rate for 2023 is 10.5%. The consensus mark for GTES’ 2023 earnings has moved north to $1.26 per share from $1.21 in the past 30 days.
Sterling Infrastructure, Inc. (STRL - Free Report) currently has a Zacks Rank #2. STRL delivered a trailing four-quarter earnings surprise of 12.2%, on average.
The Zacks Consensus Estimate for STRL’s 2023 sales and EPS indicates growth of 4.9% and 32.3%, respectively, from the previous year’s reported levels.
Willdan Group, Inc. (WLDN - Free Report) is a nationwide provider of professional, technical and consulting services to utilities, government agencies and private industry.
WLDN presently carries a Zacks Rank #2. Its expected earnings growth rate for 2023 is 50%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.