Toll Brothers Earnings and Outlook Higher as Luxury Housing Demand Improves

Leading luxury homebuilder Toll Brothers reported better than expected fiscal second-quarter earnings Tuesday. Shares of $TOL rose 3.2% in after-hours trading. Home sales revenues were $1.52 billion, down 11%. The home builder also raised its guidance for FQ3, seeing deliveries of 2,350-2,450 units, higher than street consensus of 2,078. Affordability has seen mortgage applications collapse, there has been demand creep back into the highest end home market given the scarcity of supply.

Toll Brothers

Toll Brothers Inc NYSE: TOL Reported Earnings After Close Tuesday

Fiscal Q2 2023 Earnings

Highlights

  • EPS of $2.85, beating $1.92 analyst consensus estimate, rose from $1.70 in the prior quarter and from $1.85 a year earlier.
  • Revenue of $2.51B vs. $2.07B consensus, rose from $1.78B for the three months ended April 30, 2023, and from $2.19B for the three months ended April 30, 2022.
  • Adjusted home sales gross margin 28.3% vs. 27.5% in FQ1 and 26.1% in the year-ago quarter.
  • Backlog ended FQ2 at $8.4B and 7,574 units, down 28% and 36% from a year ago, respectively.
  • Average price per home in backlog was $1.11M vs. $994.7K in FQ2 2022.

Toll Brothers operates under two segments

  1. Traditional Home Building
  2. Urban Infill (“City Living”).

Outlook

“We believe the resulting supply – demand imbalance will continue well into the future, adding to the long-term tailwinds that have supported the housing industry in recent years,” the chief executive added. “These include favorable demographics, migration trends, and more flexible work arrangements.”

  • For FQ3, the company sees deliveries of 2,350-2,450 units versus consensus of 2,078.
  • Adjusted home sales gross margin for the quarter is expected to be 27.7%
  • Average delivered price per home is anticipated to be $1,005,000-$1,025,000.
  • Expects 2023 deliveries of 8,900-9,500, vs. 8,613 consensus, compared with the prior view of 8,000-9,000.
  • Adjusted home sales gross margin is targeted to be 27.8% vs. 27% in prior guidance
  • Average delivered price per home is expected to be $975,000-$995,000.

“This improvement in demand, combined with our strategy of increasing our supply of spec homes into the spring selling season and our focus on operational efficiency, has resulted in second quarter performance that well exceeded our guidance,” said Chairman and CEO Douglas C. Yearley, Jr.

Source: Toll Brothers

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