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Toll Brothers, Inc.’s (TOL - Free Report) shares jumped more than 13% yesterday, following stellar third quarter of fiscal 2018 results, defying ongoing worries about weakness in the U.S. housing market.
The country’s leading luxury homes builder reported earnings of $1.26 per share in the fiscal third quarter, beating the Zacks Consensus Estimate of $1.03 by 22.3%. The reported figure also grew 44.8% from the year-ago profit level of 87 cents.
The company reported revenues of $1.91 billion in the quarter, beating the consensus mark of $1.81 billion. The reported figure also increased by an impressive 27% year over year, reflecting healthy new home industry and its unique position in the luxury market.
Segment Detail
Toll Brothers operates under two segments — Traditional Home Building and Urban Infill ("City Living").
Traditional Home Building revenues during the quarter totaled $1.86 billion, up 32.7% year over year, while City Living revenues of $50.6 million decreased 48.7% from $98.7 million a year ago.
Inside the Headline Numbers
Consolidated homebuilding deliveries increased 18% year over year to 2,246 units in the quarter. Deliveries increased across all the regions (barring Citi Living), i.e., North, Mid-Atlantic, South, West, California. Deliveries at Citi Living were down 62.8% from the year-ago level.
The average price of homes delivered was $851,900 in the quarter, up 7.6% from the year-ago level of $791,400.
The number of net signed contracts was 2,316 units in the quarter, up 7.1% year over year. Value of net signed contracts was $2.03 billion, reflecting an increase of 12% from the year-ago quarter. This marks the 16th consecutive quarter of year-over-year growth in contracts.
At the end of fiscal third quarter, Toll Brothers had a backlog of 7,100 homes, up 13% from the prior-year quarter. Potential housing revenues from backlog grew 22% year over year to $6.48 billion (the highest third-quarter backlog in 12 years). The average price of backlog was $912,600, up 8% from $845,100 in the prior-year quarter.
Toll Brothers Inc. Price, Consensus and EPS Surprise
The company’s homebuilding adjusted gross margin contracted 70 basis points (bps) to 24.3% in the quarter under review. The downside was due to higher input costs.
As a percentage of revenues, SG&A expenses improved 120 bps to 9.1% in the quarter.
Operating margin of 12% expanded 20 bps in the quarter.
Financials
Toll Brothers had $522.2 million in cash as of Jul 31, 2018 compared with $712.8 million on Oct 31, 2017.
During the fiscal third quarter, the company repurchased roughly 3.7 million shares of common stock at an average cost of $37.24 per share, for a total purchase price of approximately $136 million.
Fiscal Fourth-Quarter Guidance
The company expects home deliveries between 2,550 units and 2,850 units (versus 2,424 units delivered in the prior year quarter) at an average price of $840,000-$870,000 (versus $836,600 a year ago).
Adjusted gross margin in the quarter is expected to be approximately 24.8% compared with 25.3% in the year-ago quarter.
SG&A expenses are estimated at approximately 8.1% of the revenues (compared with 8.3% a year ago).
Fiscal 2018 Guidance
Home deliveries are now anticipated in the range of 8,100-8,400 units (versus 8,000-8,500 units expected earlier) at an average price of $835,000-$860,000 (prior expectation was within $830,000-$860,000).
The company narrowed its earlier guided range for total revenues. Currently, it expects revenues between $6.76 billion and $7.22 billion versus $6.64-$7.31 billion expected earlier. In fiscal 2017, the company had reported revenues of $5.82 billion.
Toll Brothers expects adjusted gross margin of about 24%, consistent with the mid-point of its earlier guided range of 23.75-24.25%. This indicates an improvement from 24.8% reported in fiscal 2017. SG&A expenses are estimated at approximately 9.8% of the revenues.
Zacks Rank
Currently, Toll Brothers carries a Zacks Rank #3 (Hold).
D.R. Horton’s fiscal 2018 earnings are expected to rise 40.5%.
PulteGroup’s current-year earnings are expected to grow 61.2%.
Lennar’s earnings are expected to grow 37.5% in 2018.
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Toll Brothers (TOL) Shares Jump on Q3 Earnings & Revenue Beat
Toll Brothers, Inc.’s (TOL - Free Report) shares jumped more than 13% yesterday, following stellar third quarter of fiscal 2018 results, defying ongoing worries about weakness in the U.S. housing market.
The country’s leading luxury homes builder reported earnings of $1.26 per share in the fiscal third quarter, beating the Zacks Consensus Estimate of $1.03 by 22.3%. The reported figure also grew 44.8% from the year-ago profit level of 87 cents.
The company reported revenues of $1.91 billion in the quarter, beating the consensus mark of $1.81 billion. The reported figure also increased by an impressive 27% year over year, reflecting healthy new home industry and its unique position in the luxury market.
Segment Detail
Toll Brothers operates under two segments — Traditional Home Building and Urban Infill ("City Living").
Traditional Home Building revenues during the quarter totaled $1.86 billion, up 32.7% year over year, while City Living revenues of $50.6 million decreased 48.7% from $98.7 million a year ago.
Inside the Headline Numbers
Consolidated homebuilding deliveries increased 18% year over year to 2,246 units in the quarter. Deliveries increased across all the regions (barring Citi Living), i.e., North, Mid-Atlantic, South, West, California. Deliveries at Citi Living were down 62.8% from the year-ago level.
The average price of homes delivered was $851,900 in the quarter, up 7.6% from the year-ago level of $791,400.
The number of net signed contracts was 2,316 units in the quarter, up 7.1% year over year. Value of net signed contracts was $2.03 billion, reflecting an increase of 12% from the year-ago quarter. This marks the 16th consecutive quarter of year-over-year growth in contracts.
At the end of fiscal third quarter, Toll Brothers had a backlog of 7,100 homes, up 13% from the prior-year quarter. Potential housing revenues from backlog grew 22% year over year to $6.48 billion (the highest third-quarter backlog in 12 years). The average price of backlog was $912,600, up 8% from $845,100 in the prior-year quarter.
Toll Brothers Inc. Price, Consensus and EPS Surprise
Toll Brothers Inc. Price, Consensus and EPS Surprise | Toll Brothers Inc. Quote
Margins
The company’s homebuilding adjusted gross margin contracted 70 basis points (bps) to 24.3% in the quarter under review. The downside was due to higher input costs.
As a percentage of revenues, SG&A expenses improved 120 bps to 9.1% in the quarter.
Operating margin of 12% expanded 20 bps in the quarter.
Financials
Toll Brothers had $522.2 million in cash as of Jul 31, 2018 compared with $712.8 million on Oct 31, 2017.
During the fiscal third quarter, the company repurchased roughly 3.7 million shares of common stock at an average cost of $37.24 per share, for a total purchase price of approximately $136 million.
Fiscal Fourth-Quarter Guidance
The company expects home deliveries between 2,550 units and 2,850 units (versus 2,424 units delivered in the prior year quarter) at an average price of $840,000-$870,000 (versus $836,600 a year ago).
Adjusted gross margin in the quarter is expected to be approximately 24.8% compared with 25.3% in the year-ago quarter.
SG&A expenses are estimated at approximately 8.1% of the revenues (compared with 8.3% a year ago).
Fiscal 2018 Guidance
Home deliveries are now anticipated in the range of 8,100-8,400 units (versus 8,000-8,500 units expected earlier) at an average price of $835,000-$860,000 (prior expectation was within $830,000-$860,000).
The company narrowed its earlier guided range for total revenues. Currently, it expects revenues between $6.76 billion and $7.22 billion versus $6.64-$7.31 billion expected earlier. In fiscal 2017, the company had reported revenues of $5.82 billion.
Toll Brothers expects adjusted gross margin of about 24%, consistent with the mid-point of its earlier guided range of 23.75-24.25%. This indicates an improvement from 24.8% reported in fiscal 2017. SG&A expenses are estimated at approximately 9.8% of the revenues.
Zacks Rank
Currently, Toll Brothers carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks in the industry are D.R. Horton, Inc. (DHI - Free Report) , PulteGroup, Inc. (PHM - Free Report) and Lennar Corporation (LEN - Free Report) . While D.R. Horton and PulteGroup sport a Zacks Rank #1 (Strong Buy), Lennar carries a Zacks Rank #2 (buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
D.R. Horton’s fiscal 2018 earnings are expected to rise 40.5%.
PulteGroup’s current-year earnings are expected to grow 61.2%.
Lennar’s earnings are expected to grow 37.5% in 2018.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>