Toll Brothers, Inc. ((TOL Quick QuoteTOL - Free Report) ) reported third-quarter fiscal 2025 (ended July 31) results, with adjusted earnings and total revenues topping the Zacks Consensus Estimate. On a year-over-year basis, both the top and bottom lines increased.

Despite ongoing affordability challenges and broader economic uncertainty, the company is benefiting from the strength of its luxury positioning and its higher-income customer base. Toll Brothers remains disciplined in managing both pricing and sales velocity to optimize margins and overall returns. At the same time, it is carefully controlling its speculative home starts, adjusting decisions at the community level to align with localized demand trends.

TOL’s Quarterly Earnings & Revenue Discussion

The company reported adjusted earnings per share (EPS) of $3.73, which surpassed the Zacks Consensus Estimate of $3.59 by 3.9% and grew 3.6% from the year-ago period.

In the fiscal third quarter, total revenues of $2,945.1 million beat the consensus mark of $2,852 million. The top line increased 8% on a year-over-year basis.

Inside Toll Brothers’ Q3 Results

The company’s total home sales revenues were up 6% (above our projection of 5.5% year-over-year growth) from the prior-year quarter to $2.9 billion. Home deliveries were up 5% (same as our expectation of 5% growth year over year) from the year-ago quarter to 2,959 units. The average selling price (ASP) of homes delivered was $973,600 for the quarter, up 0.5% from the year-ago level of $968,200. Our model had expected ASP to be up 0.5% year over year to $972,700.

Net-signed contracts during the quarter were 2,388 units, down year over year from 2,490 units. The value of net signed contracts was $2.4 billion, which remained constant from last year. We had projected net-signed contracts to be up 12.1% in units and 13.4% in value for the quarter.

At the fiscal third-quarter end, Toll Brothers had a backlog of 5,492 homes, representing a year-over-year decrease of 19%. Potential revenues from backlog declined 10% year over year to $6.38 billion. The average price of homes in the backlog was $1,161,000, up from $1,044,000 a year ago.

The cancellation rate (as a percentage of signed contracts) for the reported quarter was 7.5%, up from 6.4% in the prior-year period.

TOL’s adjusted home sales gross margin was 27.5%, which contracted 130 basis points (bps) for the quarter. Selling, general and administrative (SG&A) expenses, as a percentage of home sales revenues, were 8.8%, down 20 bps from the year-ago quarter.

TOL’s Balance Sheet & Cash Flow

The company had cash and cash equivalents of $852.3 million at the fiscal third-quarter end compared with $1.3 billion at the fiscal 2024-end. The debt-to-capital ratio improved to 26.7% from 27% at the end of fiscal 2024. The net debt-to-capital ratio was 19.3% compared with 15.2% at the fiscal 2024-end. At the end of the fiscal third 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, TOL bought back approximately 1.8 million shares for a total of $201.4 million.

At the end of the fiscal third quarter, the company controlled about 76,800 lots, 57% of which were under control rather than owned outright, ensuring sufficient land for future expansion.

TOL Unveils Q4 Guidance

Toll Brothers expects home deliveries of 3,350 units (compared with 3,431 units delivered in the prior-year quarter) at an average price of $970,000-$980,000 (compared with $950,200 in the year-ago quarter).

Adjusted home sales gross margin is expected to be 27%, implying a decline from 27.9% in the year-ago period. SG&A expenses are estimated to be 8.3% of home sales revenues, indicating a rise from 8.3% in the year-ago period. The company expects the effective tax rate to be 25.5%.

Toll Brothers Retains FY25 Guidance

For fiscal 2025, home deliveries are anticipated to be in the range of 11,200 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 $950,000-$960,000, 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 the 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 the 9.3% reported in fiscal 2024. The company expects the effective tax rate to be 25.1%.

TOL’s Zacks Rank & Key Picks

Toll Brothers currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks from the Construction sector are Everus Construction Group Inc. ((ECG Quick QuoteECG - Free Report) ), Tutor Perini ((TPC Quick QuoteTPC - Free Report) ) and Great Lakes Dredge & Dock ((GLDD Quick QuoteGLDD - Free Report) ).

Everus Construction Group presently sports a Zacks Rank #1 (Strong Buy). The company delivered a trailing four-quarter earnings surprise of 42.7%. ECG stock has jumped 14.6% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for ECG’s 2025 sales and EPS indicates growth of 18% and 3.9%, respectively, from the year-ago period’s levels.

Tutor Perini sports a Zacks Rank of 1 at present. The company delivered a trailing four-quarter earnings surprise of 387.2%, on average. Tutor Perini stock has skyrocketed 131.5% year to date.

The Zacks Consensus Estimate for Tutor Perini’s 2025 sales and EPS indicates growth of 20.6% and 187%, respectively, from the prior-year levels.

Great Lakes Dredge & Dock flaunts a Zacks Rank of 1 at present. The company delivered a trailing four-quarter earnings surprise of 45.3%, on average. Great Lakes Dredge & Dock stock has gained 0.7% year to date.

The Zacks Consensus Estimate for Great Lakes Dredge & Dock’s 2025 sales and EPS indicates growth of 9% and 21.4%, respectively, from the prior-year levels.