Toll Brothers, Inc. (TOL Quick QuoteTOL - Free Report) reported second-quarter fiscal 2025 (ended April 30) results, with adjusted earnings and total revenues topping the Zacks Consensus Estimate. On a year-over-year basis, the bottom line grew while the top line tumbled.

The quarterly performance reflects soft contributions from the Land sales and other segment, partially offset by growth in home sales revenues. The housing market uncertainties persist and are expected to elevate if the new tax regime is fully implemented, mainly hitting the homebuilding cost structure. Nonetheless, the company is optimistic about its long-term growth trend, backed by the shortage of housing and the favorable demographics.

Furthermore, TOL believes that with its broadly diversified luxury product offerings, balanced portfolio of build-to-order and spec homes, and its strategy of prioritizing sales price and margin over pace, will help it navigate through the choppy market conditions.

Shares of this leading luxury homebuilder rose 5.1% during yesterday’s after-hours trading session following the earnings release. The investors’ sentiments are likely to have been boosted by the 9% hike in the company’s quarterly dividend to 25 cents per share ($1 annually).

TOL’s Quarterly Earnings & Revenue Discussion

The company reported adjusted earnings per share (EPS) of $3.50, which surpassed the Zacks Consensus Estimate of $2.86 by 22.4% and grew 3.6% from the year-ago period.

Toll Brothers Inc. Price, Consensus and EPS Surprise

Toll Brothers Inc. price-consensus-eps-surprise-chart | Toll Brothers Inc. Quote

Total revenues (including Home sales and Land sales and other) of $2.74 billion also topped the consensus mark of $2.5 billion by 9.5% but decreased 3.5% year over year. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Inside Toll Brothers’ Q2 Results

The company’s total home sales revenues were up 2% (above our projection of a 5% year-over-year decline) from the prior-year quarter to $2.71 billion. Homes delivered were up 10% (above our expectation of 0.1% growth year over year) from the year-ago quarter to 2,899 units. The average selling price (ASP) of homes delivered was $933,600 for the quarter, down 6.9% from the year-ago level of $1,002,300. Our model had expected ASP to be down 5.1% year over year to $951,500.

Net-signed contracts during the quarter were 2,650 units, down year over year from 3,041 units. The value of net signed contracts was $2.6 billion, reflecting a decline of 11.6% year over year. We had projected net-signed contracts to be up 3.8% in units and 4.4% in value for the quarter.

At the fiscal second-quarter end, Toll Brothers had a backlog of 6,063 homes, representing a year-over-year decrease of 14.5%. Potential revenues from backlog declined 7.3% year over year to $6.84 billion. The average price of homes in the backlog was $1,128,100, up from $1,040,200 a year ago.

The cancellation rate (as a percentage of signed contracts) for the reported quarter was 6.2%, up from 5.7% in the prior-year period.

TOL’s adjusted home sales gross margin was 27.5%, which contracted 70 basis points (bps) for the quarter. Selling, general and administrative (SG&A) expenses, as a percentage of home sales revenues, were 9.5%, up 50 bps from the year-ago quarter.

TOL’s Balance Sheet & Cash Flow

The company had cash and cash equivalents of $686.5 million at the fiscal second-quarter end compared with $1.3 billion at the fiscal 2024-end. The debt-to-capital ratio improved to 26.1% from 27% at the end of fiscal 2024. The net debt-to-capital ratio was 19.8% compared with 15.2% at the fiscal 2024-end. At the end of the fiscal second quarter, the company had $2.19 billion available under its $2.35 billion revolving credit facility, set to mature in February 2030.

During the first six months of fiscal 2025, the company bought back approximately 1.8 million shares for a total of $201.1 million.

At the end of the fiscal second quarter, TOL controlled about 78,600 lots, 58% of which were under control rather than owned outright, ensuring sufficient land for future expansion.

TOL Unveils Fiscal Q3 Guidance

Toll Brothers expects home deliveries of 2,800-3,000 units (compared with 2,814 units delivered in the prior-year quarter) at an average price of $965,000-$985,000 (compared with $968,200 in the year-ago quarter).

Adjusted home sales gross margin is expected to be 27.25%, implying a decline from 28.8% in the year-ago period. SG&A expenses are estimated to be 9.2% of home sales revenues, indicating a rise from 9% in the year-ago period. The company expects the effective tax rate to be 26%.

Toll Brothers Retains Fiscal 2025 Guidance

For fiscal 2025, home deliveries are anticipated to be in the range of 11,200-11,600 units. The estimated range reflects growth from the fiscal 2024 level of 10,813. It expects the period-end community count to be 440-450.

The average price of delivered homes is expected to be $945,000-$965,000, indicating a decline from $976,900 in fiscal 2024.

Toll Brothers expects an adjusted home sales gross margin of 27.25%. This reflects a decline from 28.4% reported in fiscal 2024.

SG&A expenses, as a percentage of home sales revenues, are now projected to be 9.4-9.5%, still an increase from 9.3% reported in fiscal 2024. The company expects the effective tax rate to be 25.5%.

TOL’s Zacks Rank & Peer Releases

Toll Brothers currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Meritage Homes Corporation (MTH Quick QuoteMTH - Free Report) reported first-quarter 2025 results, wherein earnings missed the Zacks Consensus Estimate, but total closing revenues topped the same. Revenues beat the consensus estimate for the tenth consecutive quarter.

Meritage Homes kicked off 2025 on solid footing, selling nearly 3,900 homes in the first quarter, even as the housing market faced headwinds. With the strategic focus on affordability and a strong pipeline of move-in-ready homes, Meritage believes it is well-positioned to grow market share in the current environment. Under the Homebuilding umbrella, home closing revenues of $1.34 billion declined 8% from the prior-year quarter’s level due to lower ASP. Land closing revenues, however, grew 569% to $15.4 million from a year ago.

PulteGroup Inc. (PHM Quick QuotePHM - Free Report) has reported better-than-expected first-quarter 2024 results, wherein adjusted earnings and total revenues handily beat the Zacks Consensus Estimate. The company's performance continues to benefit from its diversified operations and strategic focus on balancing sales price and pace to maintain strong returns.

Home sale revenues decreased 1.8% year over year to $3.75 billion. Land sale and other revenues increased 41.2% to $52.6 million from a year ago. Home sales gross margin was down 210 basis points year over year to 27.5%. PulteGroup’s backlog, which represents orders yet to be closed, was 11,335 units, down from 13,430 units a year ago.

NVR, Inc. (NVR Quick QuoteNVR - Free Report) reported first-quarter 2025 results, with earnings and Homebuilding revenues missing the Zacks Consensus Estimate. Homebuilding revenues increased year over year, while the bottom line declined from the prior-year quarter’s figure.

For the quarter, the Homebuilding segment reported a modest increase in settlements and settlement prices, while new orders and average sales prices declined. NVR’s backlog weakened, and gross margins compressed due to higher lot costs and affordability pressures. On a unit basis, backlog at the end of March 31, 2025, decreased 9% from the prior-year quarter’s figure to 10,165 homes and fell 7% on a dollar basis to $4.84 billion.