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Why Is Toll Brothers (TOL) Up 14.9% Since Last Earnings Report?
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A month has gone by since the last earnings report for Toll Brothers (TOL - Free Report) . Shares have added about 14.9% 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 its most recent earnings report in order to get a better handle on the important drivers.
Toll Brothers Q1 Earnings & Revenues Beat, Guidance Up
Toll Brothers reported solid results for first-quarter fiscal 2024 (ended Jan 31, 2024), wherein its top and bottom lines surpassed the Zacks Consensus Estimate and increased on a year-over-year basis.
Since mid-January, TOL has experienced a notable surge in demand coinciding with the onset of the spring selling season. Buoyed by a robust job market, improving consumer confidence, and sustained low levels of resale inventory, the company maintained an optimistic outlook for strong demand in the new homes market throughout 2024.
Following encouraging fiscal first-quarter performance and a robust start to the spring sales season, the company has revised upward its full-year guidance across all key metrics. Additionally, in February, the company completed the sale of a land parcel to a commercial developer, generating net cash proceeds of $180.7 million. This transaction is expected to yield a pre-tax land sale gain of approximately $175 million in the fiscal second quarter. Accounting for both the enhanced homebuilding guidance and the impact of the land sale, Toll Brothers now anticipates earnings per share (EPS) between $13.25 and $13.75 for fiscal 2024, alongside a return on beginning equity of around 21%.
Earnings & Revenue Discussion
This Fort Washington, PA-based homebuilder delivered EPS of $2.25, which beat the Zacks Consensus Estimate of $1.77 by 27.1% and increased 32.4% from the year-ago period profit level of $1.70. The increase was due to higher revenues along with greater operating efficiency.
Total revenues (including Home sales and Land sales and others) came in at $1.95 billion, which beat the consensus mark of $1.87 billion by 4.1% and grew 9.4% year over year. The growth was attributable to higher deliveries and prices.
Inside the Headlines
The company’s total home sales revenues improved 10.4% from the prior-year quarter to $1.93 billion. Homes delivered were up 6% year over year to 1,927 units. Deliveries increased across the company’s geographic regions served by the company barring North, Mountain and Pacific. The average price of homes delivered was $1,002,600 for the quarter, up from the year-ago level of $958,300.
Moreover, net-signed contracts for the reported quarter were 2,042 units, up 40% year over year. The value of net signed contracts was $2.06 billion, reflecting a rise of 42%.
At the fiscal first-quarter end, Toll Brothers had a backlog of 6,693 homes, representing a year-over-year decrease of 13%. Potential revenues from backlog declined 18% year over year to $7.08 billion. The average price of homes in the backlog totaled $1,058,000, down from $1,110,200 a year ago.
The cancelation rate (as a percentage of signed contracts) for the reported quarter was 8.6% compared with 14.3% in the prior-year period.
Margins
The company’s adjusted home sales gross margin was 28.9%, expanding 140 basis points (bps) for the quarter. SG&A expenses, as a percentage of home sales revenues, were 11.9%, which decreased 20 bps from the year-ago quarter.
Financials
TOL had cash and cash equivalents of $754.8 million at the end of the fiscal first quarter compared with $1.3 billion at the fiscal 2023-end. At January 2024-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 $2.72 billion, down from $2.86 billion at the fiscal 2023-end. Debt to capital was 28% at the fiscal first-quarter end, down from 29.6% at the fiscal 2023-end.
Fiscal Second-Quarter Guidance
Toll Brothers expect home deliveries of 2,400-2,500 units (versus 2,492 units delivered in the prior-year quarter) at an average price of $1,000,000-$1,010,000 (suggesting a rise from $999,300 a year ago). It expects period-end community count to be 385.
Adjusted home sales gross margin is expected to be 27.6%, implying a decrease from 28.3% in the year-ago period. SG&A expenses are estimated to be 9.7% of home sales revenues, indicating a rise from 9.1% in the year-ago period. The company expects the effective tax rate to be 25.8%.
Fiscal 2024 Guidance Raised
For fiscal 2024, home deliveries are now anticipated to be in the range of 10,000-10,500 units versus 9,850-10,350 units expected earlier. The estimated range reflects growth from 9,597 units in fiscal 2023. It expects period-end community count to be 410.
The average price of delivered homes is still expected to be $940,000-$960,000. The estimated range reflects a decrease from $1,027,900 reported in fiscal 2023.
Toll Brothers now expects an adjusted home sales gross margin of 28% (versus 27.9% expected earlier) compared with 28.7% reported in fiscal 2023. SG&A expenses, as a percentage of home sales revenues, are now projected to be 9.8% for fiscal 2024. In the year-ago period, the metric was 9.2%. The company now expects the effective tax rate to be 25.5%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 36.4% due to these changes.
VGM Scores
At this time, Toll Brothers has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Toll Brothers has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is Toll Brothers (TOL) Up 14.9% Since Last Earnings Report?
A month has gone by since the last earnings report for Toll Brothers (TOL - Free Report) . Shares have added about 14.9% 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 its most recent earnings report in order to get a better handle on the important drivers.
Toll Brothers Q1 Earnings & Revenues Beat, Guidance Up
Toll Brothers reported solid results for first-quarter fiscal 2024 (ended Jan 31, 2024), wherein its top and bottom lines surpassed the Zacks Consensus Estimate and increased on a year-over-year basis.
Since mid-January, TOL has experienced a notable surge in demand coinciding with the onset of the spring selling season. Buoyed by a robust job market, improving consumer confidence, and sustained low levels of resale inventory, the company maintained an optimistic outlook for strong demand in the new homes market throughout 2024.
Following encouraging fiscal first-quarter performance and a robust start to the spring sales season, the company has revised upward its full-year guidance across all key metrics. Additionally, in February, the company completed the sale of a land parcel to a commercial developer, generating net cash proceeds of $180.7 million. This transaction is expected to yield a pre-tax land sale gain of approximately $175 million in the fiscal second quarter. Accounting for both the enhanced homebuilding guidance and the impact of the land sale, Toll Brothers now anticipates earnings per share (EPS) between $13.25 and $13.75 for fiscal 2024, alongside a return on beginning equity of around 21%.
Earnings & Revenue Discussion
This Fort Washington, PA-based homebuilder delivered EPS of $2.25, which beat the Zacks Consensus Estimate of $1.77 by 27.1% and increased 32.4% from the year-ago period profit level of $1.70. The increase was due to higher revenues along with greater operating efficiency.
Total revenues (including Home sales and Land sales and others) came in at $1.95 billion, which beat the consensus mark of $1.87 billion by 4.1% and grew 9.4% year over year. The growth was attributable to higher deliveries and prices.
Inside the Headlines
The company’s total home sales revenues improved 10.4% from the prior-year quarter to $1.93 billion. Homes delivered were up 6% year over year to 1,927 units. Deliveries increased across the company’s geographic regions served by the company barring North, Mountain and Pacific. The average price of homes delivered was $1,002,600 for the quarter, up from the year-ago level of $958,300.
Moreover, net-signed contracts for the reported quarter were 2,042 units, up 40% year over year. The value of net signed contracts was $2.06 billion, reflecting a rise of 42%.
At the fiscal first-quarter end, Toll Brothers had a backlog of 6,693 homes, representing a year-over-year decrease of 13%. Potential revenues from backlog declined 18% year over year to $7.08 billion. The average price of homes in the backlog totaled $1,058,000, down from $1,110,200 a year ago.
The cancelation rate (as a percentage of signed contracts) for the reported quarter was 8.6% compared with 14.3% in the prior-year period.
Margins
The company’s adjusted home sales gross margin was 28.9%, expanding 140 basis points (bps) for the quarter. SG&A expenses, as a percentage of home sales revenues, were 11.9%, which decreased 20 bps from the year-ago quarter.
Financials
TOL had cash and cash equivalents of $754.8 million at the end of the fiscal first quarter compared with $1.3 billion at the fiscal 2023-end. At January 2024-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 $2.72 billion, down from $2.86 billion at the fiscal 2023-end. Debt to capital was 28% at the fiscal first-quarter end, down from 29.6% at the fiscal 2023-end.
Fiscal Second-Quarter Guidance
Toll Brothers expect home deliveries of 2,400-2,500 units (versus 2,492 units delivered in the prior-year quarter) at an average price of $1,000,000-$1,010,000 (suggesting a rise from $999,300 a year ago). It expects period-end community count to be 385.
Adjusted home sales gross margin is expected to be 27.6%, implying a decrease from 28.3% in the year-ago period. SG&A expenses are estimated to be 9.7% of home sales revenues, indicating a rise from 9.1% in the year-ago period. The company expects the effective tax rate to be 25.8%.
Fiscal 2024 Guidance Raised
For fiscal 2024, home deliveries are now anticipated to be in the range of 10,000-10,500 units versus 9,850-10,350 units expected earlier. The estimated range reflects growth from 9,597 units in fiscal 2023. It expects period-end community count to be 410.
The average price of delivered homes is still expected to be $940,000-$960,000. The estimated range reflects a decrease from $1,027,900 reported in fiscal 2023.
Toll Brothers now expects an adjusted home sales gross margin of 28% (versus 27.9% expected earlier) compared with 28.7% reported in fiscal 2023. SG&A expenses, as a percentage of home sales revenues, are now projected to be 9.8% for fiscal 2024. In the year-ago period, the metric was 9.2%. The company now expects the effective tax rate to be 25.5%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 36.4% due to these changes.
VGM Scores
At this time, Toll Brothers has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Toll Brothers has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.