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Toll Brothers (TOL) Up 11.4% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Toll Brothers (TOL - Free Report) . Shares have added about 11.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Toll Brothers due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Toll Brothers reported mixed results for fourth-quarter fiscal 2023 (ended Oct 31, 2023), wherein its top and bottom lines surpassed the Zacks Consensus Estimate but decreased on a year-over-year basis.
In the recent earnings release on Tuesday, chief executive Doug Yearley stated that the company experienced "strong demand" throughout the fiscal fourth quarter. He also mentioned that Toll Brothers is actively striving to maintain lower unit prices in the coming year.
As TOL approaches the onset of the spring selling season in January, the company finds optimism in the recent decline in mortgage rates. Given the historical lows in resale inventories, prospective buyers are increasingly attracted to new homes. Additionally, the anticipation of lower rates coupled with reduced inflation is expected to further bolster the already robust demand.
This, combined with its policy of boosting its supply of spec homes and focus on operational efficiency, has helped TOL deliver solid fiscal 2023 results.
Earnings & Revenue Discussion
This Fort Washington, PA-based homebuilder delivered earnings per share (EPS) of $4.11, which beat the Zacks Consensus Estimate of $3.66 by 12.3% but decreased 12% from the year-ago period. The decrease was due to an approximate $103 million net after-tax benefit related to a litigation settlement in the year-ago quarter.
Total revenues (including Home sales and Land sales and others) came in at $3.02 billion, which beat the consensus mark of $2.78 billion by 8.6% but decreased by 18.6% year over year.
Inside the Headlines
The company’s total home sales revenues declined 17.6% from the prior-year quarter to $2.95 billion. Homes delivered were down 27% year over year to 2,755 units. Deliveries decreased across the company’s geographic regions served by the company. The average price of homes delivered was $1,071,100 for the quarter, up from the year-ago level of $950,700.
Nonetheless, net-signed contracts for the reported quarter were 2,038 units, up 72% year over year. The value of net signed contracts was $2.01 billion, reflecting a rise of 53%.
At the fiscal fourth-quarter end, Toll Brothers had a backlog of 6,578 homes, representing a year-over-year decrease of 19%. Potential revenues from backlog declined by 22% year over year to $6.95 billion. The average price of homes in the backlog totaled $1,055,800, down from $1,095,800 a year ago.
The cancelation rate (as a percentage of signed contracts) for the reported quarter was 10.8% compared with 20.8% in the prior-year period.
Margins
The company’s adjusted home sales gross margin was 29.1%, expanding 10 basis points (bps) for the quarter. SG&A expenses, as a percentage of home sales revenues, were 8.2%, which increased 50 bps from the year-ago quarter.
Fiscal 2023 Highlights
Total revenues were $9.99 billion, down 2.7% from $10.28 billion. Toll Brothers generated $9.9 billion from home sales (up 1.6% year over year), boosting its earnings per share by 13% to $12.36. This growth was fueled by a 120-bps rise in adjusted gross margin to 28.7% and a 90-bps drop in SG&A expenses to 9.2%.
Financials
TOL had cash and cash equivalents of $1,300.1 million at the end of fiscal 2023 compared with $1,346.8 million at the fiscal 2022-end. At October 2023-end, it had $1.79 billion available under the $1.91 billion bank revolving credit facility, scheduled to mature in February 2028.
Total debt at the fiscal 2023-end was $2.86 billion, down from $3.33 billion at the fiscal 2022-end. Debt to capital was 29.6% at the fiscal 2023-end, down from 35.7% at the fiscal 2022-end.
During the year, the company repurchased 7.9 million shares of its common stock at an average price of $72 per share for approximately $565.9 million.
Fiscal First-Quarter Guidance
Toll Brothers expect home deliveries of 1,800-1,900 units (versus 1,826 units delivered in the prior-year quarter) at an average price of $985,000-$1,005,000 (suggesting a rise from $958,300 a year ago).
Adjusted home sales gross margin is expected to be 28%, implying an increase from 27.5% in the year-ago period. SG&A expenses are estimated to be 12.4% of home sales revenues, indicating a rise from 12.1% in the year-ago period. The company expects the effective tax rate to be 26%.
Fiscal 2024 Guidance
For fiscal 2024, home deliveries are anticipated to be in the range of 9,850-10,350 units. The estimated range reflects growth from 9,597 units in fiscal 2023.
The average price of delivered homes is expected to be $940,000-$960,000. The estimated range reflects a decrease from $1,027,900 reported in fiscal 2023.
Toll Brothers expects an adjusted home sales gross margin of 27.9% compared with 28.7% reported in fiscal 2023. SG&A expenses, as a percentage of home sales revenues, are projected to be 9.9% for fiscal 2024. In the year-ago period, the metric was 9.2%. The company expects the effective tax rate to be 26%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Toll Brothers has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Toll Brothers has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Toll Brothers (TOL) Up 11.4% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Toll Brothers (TOL - Free Report) . Shares have added about 11.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Toll Brothers due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Toll Brothers Q4 Earnings & Revenues Beat Estimates
Toll Brothers reported mixed results for fourth-quarter fiscal 2023 (ended Oct 31, 2023), wherein its top and bottom lines surpassed the Zacks Consensus Estimate but decreased on a year-over-year basis.
In the recent earnings release on Tuesday, chief executive Doug Yearley stated that the company experienced "strong demand" throughout the fiscal fourth quarter. He also mentioned that Toll Brothers is actively striving to maintain lower unit prices in the coming year.
As TOL approaches the onset of the spring selling season in January, the company finds optimism in the recent decline in mortgage rates. Given the historical lows in resale inventories, prospective buyers are increasingly attracted to new homes. Additionally, the anticipation of lower rates coupled with reduced inflation is expected to further bolster the already robust demand.
This, combined with its policy of boosting its supply of spec homes and focus on operational efficiency, has helped TOL deliver solid fiscal 2023 results.
Earnings & Revenue Discussion
This Fort Washington, PA-based homebuilder delivered earnings per share (EPS) of $4.11, which beat the Zacks Consensus Estimate of $3.66 by 12.3% but decreased 12% from the year-ago period. The decrease was due to an approximate $103 million net after-tax benefit related to a litigation settlement in the year-ago quarter.
Total revenues (including Home sales and Land sales and others) came in at $3.02 billion, which beat the consensus mark of $2.78 billion by 8.6% but decreased by 18.6% year over year.
Inside the Headlines
The company’s total home sales revenues declined 17.6% from the prior-year quarter to $2.95 billion. Homes delivered were down 27% year over year to 2,755 units. Deliveries decreased across the company’s geographic regions served by the company. The average price of homes delivered was $1,071,100 for the quarter, up from the year-ago level of $950,700.
Nonetheless, net-signed contracts for the reported quarter were 2,038 units, up 72% year over year. The value of net signed contracts was $2.01 billion, reflecting a rise of 53%.
At the fiscal fourth-quarter end, Toll Brothers had a backlog of 6,578 homes, representing a year-over-year decrease of 19%. Potential revenues from backlog declined by 22% year over year to $6.95 billion. The average price of homes in the backlog totaled $1,055,800, down from $1,095,800 a year ago.
The cancelation rate (as a percentage of signed contracts) for the reported quarter was 10.8% compared with 20.8% in the prior-year period.
Margins
The company’s adjusted home sales gross margin was 29.1%, expanding 10 basis points (bps) for the quarter. SG&A expenses, as a percentage of home sales revenues, were 8.2%, which increased 50 bps from the year-ago quarter.
Fiscal 2023 Highlights
Total revenues were $9.99 billion, down 2.7% from $10.28 billion. Toll Brothers generated $9.9 billion from home sales (up 1.6% year over year), boosting its earnings per share by 13% to $12.36. This growth was fueled by a 120-bps rise in adjusted gross margin to 28.7% and a 90-bps drop in SG&A expenses to 9.2%.
Financials
TOL had cash and cash equivalents of $1,300.1 million at the end of fiscal 2023 compared with $1,346.8 million at the fiscal 2022-end. At October 2023-end, it had $1.79 billion available under the $1.91 billion bank revolving credit facility, scheduled to mature in February 2028.
Total debt at the fiscal 2023-end was $2.86 billion, down from $3.33 billion at the fiscal 2022-end. Debt to capital was 29.6% at the fiscal 2023-end, down from 35.7% at the fiscal 2022-end.
During the year, the company repurchased 7.9 million shares of its common stock at an average price of $72 per share for approximately $565.9 million.
Fiscal First-Quarter Guidance
Toll Brothers expect home deliveries of 1,800-1,900 units (versus 1,826 units delivered in the prior-year quarter) at an average price of $985,000-$1,005,000 (suggesting a rise from $958,300 a year ago).
Adjusted home sales gross margin is expected to be 28%, implying an increase from 27.5% in the year-ago period. SG&A expenses are estimated to be 12.4% of home sales revenues, indicating a rise from 12.1% in the year-ago period. The company expects the effective tax rate to be 26%.
Fiscal 2024 Guidance
For fiscal 2024, home deliveries are anticipated to be in the range of 9,850-10,350 units. The estimated range reflects growth from 9,597 units in fiscal 2023.
The average price of delivered homes is expected to be $940,000-$960,000. The estimated range reflects a decrease from $1,027,900 reported in fiscal 2023.
Toll Brothers expects an adjusted home sales gross margin of 27.9% compared with 28.7% reported in fiscal 2023. SG&A expenses, as a percentage of home sales revenues, are projected to be 9.9% for fiscal 2024. In the year-ago period, the metric was 9.2%. The company expects the effective tax rate to be 26%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Toll Brothers has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Toll Brothers has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.