It has been about a month since the last earnings report for Toll Brothers (TOL Quick QuoteTOL - Free Report) . Shares have lost about 10.7% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Toll Brothers due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important drivers.

Toll Brothers Beats Q3 Earnings & Revenue Estimates on Higher Pricing

Toll Brothers reported third-quarter fiscal 2026 (ended July 31) results, with earnings and revenues beating the Zacks Consensus Estimate. However, both top and bottom lines declined on a year-over-year basis.

TOL’s top-line beat was supported by higher delivered pricing, which partly offset lower home deliveries. The company’s average price on home deliveries increased from the prior-year quarter, while net signed contracts also grew year over year. On a macro level, the company continued to navigate a challenging housing market. Still, management highlighted the resilience of its affluent customer base and the strength of the luxury-focused business model.

TOL’s Quarterly Earnings & Revenue Discussion

The company reported diluted earnings per share (EPS) of $2.97, which beat the Zacks Consensus Estimate of $2.90 by 2.4% but declined 20.4% year over year from $3.73.

In the fiscal third quarter, total revenues of $2.66 billion surpassed the consensus mark of $2.60 billion by 2.4% but fell 9.7% from the year-ago quarter.

Inside Toll Brothers’ Q3 Results

For the quarter under review, Toll Brothers’ home sales revenues decreased 7.9% year over year to $2.65 billion from $2.88 billion. Home deliveries declined 10% to 2,662 units from 2,959 units in the year-ago quarter. Despite the lower volume, the average delivered price increased 2.3% year over year to $996,400 from $973,600, helping cushion the impact of fewer deliveries. The company ended the quarter with 471 selling communities compared with 420 in the prior-year period.

Toll Brothers’ Orders Grow While Backlog Stays Solid

Order momentum remained a constructive indicator in the quarter. Net signed contracts increased 5% year over year to 2,508 homes, while contract value rose 4.3% to $2.52 billion from $2.41 billion. The average price of signed contracts was $1,002,900 compared with $1,010,100 a year ago. Backlog ended the quarter at 5,312 homes valued at $6.24 billion, down 3.3% and 2.2%, respectively, from the prior-year period. The average price of homes in backlog increased to $1,174,400 from $1,161,000. Quarterly cancellations represented 5.4% of signed contracts, improving from 7.5% a year ago.

TOL Faces Margin Pressure From Costs

While operations were sufficient to drive an earnings beat, profitability remained under pressure. Home sales gross margin declined to 23.9% from 25.6% a year ago, while adjusted home sales gross margin fell to 25.6% from 27.5%. Nonetheless, adjusted gross margin came in 35 basis points above management’s guidance.

SG&A increased to 10% of home sales revenues from 8.8%, further constraining year-over-year profitability. Income from operations declined to $359.2 million from $487.7 million. Joint venture impairments totaled $39.6 million, while inventory impairments and write-offs included in home sales cost of revenues were $17.7 million compared with $23.3 million a year ago.

Toll Brothers’ Capital Position Supports Shareholder Returns

Toll Brothers continued returning capital while maintaining substantial liquidity. The company repurchased about 1.4 million shares during the quarter for $206.8 million at an average price of $148.63. It also paid a quarterly dividend of 26 cents per share.

Cash and cash equivalents totaled $1.06 billion at quarter-end, down from $1.26 billion at fiscal 2025 year-end and $1.11 billion at the end of the fiscal second quarter. Available liquidity under the senior unsecured revolving credit facility was $2.24 billion. The debt-to-capital ratio improved to 24.5% from 24.7% in the prior quarter, while net debt-to-capital increased to 15.6% from 15.4%.

TOL Updates Q4 & FY26 Targets

For the fourth quarter of fiscal 2026, TOL expects deliveries of 3,450-3,550 units and an average delivered price of $995,000-$1,005,000. Adjusted home sales gross margin is projected at 26%, while SG&A is estimated at 8.1% of home sales revenues. The tax rate is projected at 26%.

For fiscal 2026, TOL forecasts deliveries of 10,500-10,600 units. The estimated range reflects a decline from the fiscal 2025 level of 11,292. Average delivered price is expected at $995,000-$1,000,000, indicating growth from $960,200 in fiscal 2025. The company continues to see adjusted home sales gross margin at 26.1% (a decline from the 27.3% reported in fiscal 2025) and SG&A at 10.1% of home sales revenues, with period-end community count projected at 480-490. Management also increased projected fiscal 2026 share repurchases to $700 million from $650 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

Currently, Toll Brothers has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock has a grade of A on the value side, putting it in the top quintile for value investors.

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 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.