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Why Is Toll Brothers (TOL) Up 9.8% 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 9.8% 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? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent catalysts for Toll Brothers Inc. before we dive into how investors and analysts have reacted as of late.
TOL Beats Q2 Earnings & Revenue Estimates on Higher Deliveries
Toll Brothers reported second-quarter fiscal 2026 (ended April 30) results, with earnings and revenues beating the Zacks Consensus Estimate. However, both the top and bottom lines declined on a year-over-year basis.
TOL’s top-line beat was underpinned by steady demand across its footprint and a favorable mix that lifted delivered pricing. The company’s average price on home deliveries rose meaningfully from last year, helping cushion the impact of lower unit volume.
On a macro level, the company navigated a challenging housing market characterized by pressures such as volatile mortgage rates, elevated inflation and fluctuations in luxury home demand.
TOL’s Quarterly Earnings & Revenue Discussion
The company reported adjusted earnings per share (EPS) of $2.72, which beat the Zacks Consensus Estimate of $2.58 by 5.4% but declined 22.3% year over year.
In the fiscal second quarter, total revenues of $2.53 billion surpassed the consensus mark of $2.41 billion by 5.1% but fell 7.6% from the year-ago quarter.
Inside Toll Brothers’ Q2 Results
For the quarter under review, Toll Brothers’ total home sales revenues decreased 7.2% (down from our projection of a 11.5% year-over-year decline) year over year to $2.51 billion from $2.71 billion. Home deliveries declined 14.1% to 2,491 units from 2,899 units in the year-ago quarter (down from our expectation of a 15.4% decline year over year).
Despite the lower volume, the average delivered price increased 8% year over year to about $1,008,600 from $933,600, highlighting a favorable pricing and mix backdrop in the luxury segment. Our model had expected ASP to be up 4.5% year over year to $975,900.
Toll Brothers’ Orders Grow While Backlog Stays Solid
Order momentum remained a constructive signal for a builder operating in a rate-sensitive environment. Net signed contracts increased 6.9% year over year to 2,834 homes, and contract value rose 8.1% to $2.81 billion, reflecting steady demand from higher-income buyers despite broader affordability pressures. We had projected net-signed contracts to be up 4% in units and 5.1% in value for the quarter.
Backlog ended the quarter at 5,394 homes valued at $6.32 billion, down 11% and 7.6%, respectively, from the prior-year period. Even so, the average price of homes in the backlog was $1,171,800, up from $1,128,100 a year ago. Cancellations were controlled, with quarterly cancellations at 4.8% of signed contracts, improving from 6.2% a year ago.
TOL Faces Margin Pressure From Write-Downs and Costs
While operations were strong enough to drive a revenue beat, profitability was pressured by lower margins and higher costs. Home sales gross margin fell to 23.9% from 26% a year ago, and adjusted home sales gross margin declined to 26.2% from 27.5%, reflecting a less favorable margin environment.
A key drag came from higher inventory impairments and write-offs embedded in home sales cost of revenues. SG&A also moved higher as a percentage of home sales revenues to 10.3% from 9.5%, further constraining year-over-year earnings performance.
Toll Brothers’ Capital Position Supports Shareholder Returns
Toll Brothers continued returning capital while maintaining a strong liquidity position. The company repurchased about 1.2 million shares during the quarter for $175.4 million at an average price of $143.72, and it increased its quarterly dividend to 26 cents per share.
Liquidity remained substantial, with cash and cash equivalents of $1.11 billion at quarter-end, down from $1.26 billion as of Oct. 31, 2025. Available liquidity under the senior unsecured revolving credit facility was $2.24 billion, reflecting strong capacity under the expanded $2.38 billion facility. Leverage stayed conservative, with the debt-to-capital at 24.7% at quarter-end (down from 26% at fiscal 2025 year-end). Net debt-to-capital was 15.4%, slightly above 15.3% at fiscal 2025 year-end, indicating only a modest uptick in net leverage while the company continued investing for growth.
TOL Updates Q3 & FY26 Targets
Management raised full-year guidance across key homebuilding metrics based on year-to-date performance. For the third quarter, TOL expects deliveries of 2,600-2,700 units (compared with 2,959 units delivered in the prior-year quarter) and an average delivered price of $965,000-$985,000 (compared with $973,600 in the year-ago quarter). Adjusted home sales gross margin is projected at 25.25%, implying a decline from 25.6% in the year-ago period. SG&A is estimated at 10.0% of home sales revenues and a tax rate of 26%.
For full-year fiscal 2026, TOL forecasts deliveries of 10,400-10,700 units. The estimated range reflects a decline from the fiscal 2025 level of 11,292. Average delivered price of $985,000-$1,000,000, indicating growth from $960,200 in fiscal 2025. The company now sees adjusted home sales gross margin at 26.10% (a decline from the 27.3% reported in fiscal 2025) and SG&A at 10.10% of home sales revenues, with period-end community count projected at 480-490.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -15.5% due to these changes.
VGM Scores
Currently, Toll Brothers has a poor Growth Score of F, a score with the same score on the momentum front. However, the stock has a grade of B on the value side, putting it in the top 40% for value investors.
Overall, the stock has an aggregate VGM Score of D. 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. Interestingly, Toll Brothers has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
View the Zacks #1 Rank List
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Why Is Toll Brothers (TOL) Up 9.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Toll Brothers (TOL - Free Report) . Shares have added about 9.8% 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? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent catalysts for Toll Brothers Inc. before we dive into how investors and analysts have reacted as of late.
TOL Beats Q2 Earnings & Revenue Estimates on Higher Deliveries
Toll Brothers reported second-quarter fiscal 2026 (ended April 30) results, with earnings and revenues beating the Zacks Consensus Estimate. However, both the top and bottom lines declined on a year-over-year basis.
TOL’s top-line beat was underpinned by steady demand across its footprint and a favorable mix that lifted delivered pricing. The company’s average price on home deliveries rose meaningfully from last year, helping cushion the impact of lower unit volume.
On a macro level, the company navigated a challenging housing market characterized by pressures such as volatile mortgage rates, elevated inflation and fluctuations in luxury home demand.
TOL’s Quarterly Earnings & Revenue Discussion
The company reported adjusted earnings per share (EPS) of $2.72, which beat the Zacks Consensus Estimate of $2.58 by 5.4% but declined 22.3% year over year.
In the fiscal second quarter, total revenues of $2.53 billion surpassed the consensus mark of $2.41 billion by 5.1% but fell 7.6% from the year-ago quarter.
Inside Toll Brothers’ Q2 Results
For the quarter under review, Toll Brothers’ total home sales revenues decreased 7.2% (down from our projection of a 11.5% year-over-year decline) year over year to $2.51 billion from $2.71 billion. Home deliveries declined 14.1% to 2,491 units from 2,899 units in the year-ago quarter (down from our expectation of a 15.4% decline year over year).
Despite the lower volume, the average delivered price increased 8% year over year to about $1,008,600 from $933,600, highlighting a favorable pricing and mix backdrop in the luxury segment. Our model had expected ASP to be up 4.5% year over year to $975,900.
Toll Brothers’ Orders Grow While Backlog Stays Solid
Order momentum remained a constructive signal for a builder operating in a rate-sensitive environment. Net signed contracts increased 6.9% year over year to 2,834 homes, and contract value rose 8.1% to $2.81 billion, reflecting steady demand from higher-income buyers despite broader affordability pressures. We had projected net-signed contracts to be up 4% in units and 5.1% in value for the quarter.
Backlog ended the quarter at 5,394 homes valued at $6.32 billion, down 11% and 7.6%, respectively, from the prior-year period. Even so, the average price of homes in the backlog was $1,171,800, up from $1,128,100 a year ago. Cancellations were controlled, with quarterly cancellations at 4.8% of signed contracts, improving from 6.2% a year ago.
TOL Faces Margin Pressure From Write-Downs and Costs
While operations were strong enough to drive a revenue beat, profitability was pressured by lower margins and higher costs. Home sales gross margin fell to 23.9% from 26% a year ago, and adjusted home sales gross margin declined to 26.2% from 27.5%, reflecting a less favorable margin environment.
A key drag came from higher inventory impairments and write-offs embedded in home sales cost of revenues. SG&A also moved higher as a percentage of home sales revenues to 10.3% from 9.5%, further constraining year-over-year earnings performance.
Toll Brothers’ Capital Position Supports Shareholder Returns
Toll Brothers continued returning capital while maintaining a strong liquidity position. The company repurchased about 1.2 million shares during the quarter for $175.4 million at an average price of $143.72, and it increased its quarterly dividend to 26 cents per share.
Liquidity remained substantial, with cash and cash equivalents of $1.11 billion at quarter-end, down from $1.26 billion as of Oct. 31, 2025. Available liquidity under the senior unsecured revolving credit facility was $2.24 billion, reflecting strong capacity under the expanded $2.38 billion facility. Leverage stayed conservative, with the debt-to-capital at 24.7% at quarter-end (down from 26% at fiscal 2025 year-end). Net debt-to-capital was 15.4%, slightly above 15.3% at fiscal 2025 year-end, indicating only a modest uptick in net leverage while the company continued investing for growth.
TOL Updates Q3 & FY26 Targets
Management raised full-year guidance across key homebuilding metrics based on year-to-date performance. For the third quarter, TOL expects deliveries of 2,600-2,700 units (compared with 2,959 units delivered in the prior-year quarter) and an average delivered price of $965,000-$985,000 (compared with $973,600 in the year-ago quarter). Adjusted home sales gross margin is projected at 25.25%, implying a decline from 25.6% in the year-ago period. SG&A is estimated at 10.0% of home sales revenues and a tax rate of 26%.
For full-year fiscal 2026, TOL forecasts deliveries of 10,400-10,700 units. The estimated range reflects a decline from the fiscal 2025 level of 11,292. Average delivered price of $985,000-$1,000,000, indicating growth from $960,200 in fiscal 2025. The company now sees adjusted home sales gross margin at 26.10% (a decline from the 27.3% reported in fiscal 2025) and SG&A at 10.10% of home sales revenues, with period-end community count projected at 480-490.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -15.5% due to these changes.
VGM Scores
Currently, Toll Brothers has a poor Growth Score of F, a score with the same score on the momentum front. However, the stock has a grade of B on the value side, putting it in the top 40% for value investors.
Overall, the stock has an aggregate VGM Score of D. 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. Interestingly, Toll Brothers has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.