The strengthening of the U.S. economy and the drive to buy luxurious homes by the rich strata of the society have propelled earnings for Toll Brothers Inc (TOL Quick QuoteTOL - Free Report) .

 

Earnings in Focus

 

Toll Brothers topped estimates for earnings and revenues by 22.3% and 5.5%, respectively. Reported earnings of $1.26 beat the Zacks Consensus Estimate of $1.03 and improved over the year-ago-quarter by 39 cents. Revenues of $1.91 billion beat the Zacks Consensus Estimate of $1.81 billion and improved from the year-earlier quarter by $410 million (see all Industrial ETFs here).

 

Toll Brothers raised its revenue guidance post impressive quarterly figures. It now expects full-year revenues in the band of $6.76-$7.22 billion, compared with the earlier forecast of $6.64-$7.31 billion.

 

Revenues of $1.91 billion mark the highest third-quarter figure ever for Toll Brothers, courtesy of growth in California, West, South, Mid-Atlantic and North regions (read: Homebuilder ETFs in Focus on Solid New Home Sales Data).

 

The company achieved 12% growth in the value of new contracts signed. About $2.03 billion worth of new contracts were the highest in the third quarter ever. Overall orders rose 7.1% and a total of 2246 homes were sold in the quarter depicting a rise of 18.3% year over year. The results reflect that the homebuilding sector holds promise despite rising construction costs and interest rates. There was a 7.6% rise in the average price of a Toll Brother’s home — the highest in four quarters. “We believe there is room for continued growth in the new home market in the coming years,” said Executive Chairman Robert Toll.

 

Market Impact

 

Shares gained 13.8% on Aug 21 following the earnings report. The stock currently has a Zacks ETF Rank of #3 (Hold) and VGM Score of A, signaling an optimistic outlook. It belongs to the top-ranked Zacks industry (Top 20%) (read: Housing Starts Scale 11-Year High: ETFs in Focus).

 

We now focus on the impact on the Home Builder ETFs that have heavy exposure to Toll Brothers:

 

iShares U.S. Home Construction ETF (ITB Quick QuoteITB - Free Report)

 

This fund tracks the Dow Jones U.S. Select Home Construction Index. There are a total of 47 holdings with Toll Brothers occupying the sixth spot with a weight of 4.48%. The average traded volume is 2.7 million shares a day. The AUM is $1.03 billion and the expense ratio is 0.43%. The fund gained 3.7% on Aug 21, closing at $38.88.

 

SPDR S&P Homebuilders ETF (XHB Quick QuoteXHB - Free Report)

 

This fund tracks the S&P Homebuilders Select Industry Index. It is an equally weighted fund. There are 35 holdings in the basket, with an allocation of 4.02% to Toll Brothers. The AUM is $907 million and the expense ratio charged is 0.35%. The fund trades daily at an average of 2.72 million shares. The fund closed trading at $40.61 on Aug 21, with a  rise of 2.6%

 

Want key ETF info delivered straight to your inbox?

 

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>