Toll Brothers, Inc. (TOL) on Q1 2021 Results - Earnings Call Transcript
Operator: Good morning everyone and welcome to the Toll Brothers First Quarter Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note today’s event is also being recorded. And at this time, I’d like to turn the conference call over to Douglas Yearley, CEO. Please go ahead. Douglas Yearley: Thank you, Jamie. Welcome and thank you for joining us. I hope you, your families, and colleagues are doing well. With me today are Marty Connor, Chief Financial Officer; Fred Cooper, Senior VP of Finance and Investor Relations; Wendy Marlett, Chief Marketing Officer; and Gregg Ziegler, Senior VP and Treasurer. Marty Connor: Thanks, Doug. Our business is really firing on all cylinders. Sales are strong, and margins are expanding. SG&A is well controlled and being leveraged. We are generating significant cash flow. In this quarter, we bought back stock, paid down debt, and grew our land holdings. And we are improving our return on equity. It is our number one priority. We expect to grow our return on beginning equity by approximately 425 basis points in fiscal year 2021, and we see further improvement in fiscal year 2022. Douglas Yearley: Thank you, Marty. Simply put, this is our time. The actions we've taken to diversify our business over the past several years have positioned us to meet the incredible demand we are seeing in every segment of the market. The growing importance of home and the desire for choice are clearly aligned with our strengths as a home builder. And we are working hard to take additional actions to ensure continued growth for the future. Before we open it up to questions, I want to sincerely thank the entire Toll Brothers team and our trade partners for the extraordinary results we produced this quarter. Jamie, let's open it up for questions. Operator: And our first question today comes from Stephen Kim from Evercore ISI. Please go ahead with your question. Mr. Kim, please go ahead with your question. Is it possible your phone is on mute? Stephen Kim: Yes, sorry about that. Thank you. Can you hear me? Douglas Yearley: We can. Good morning. Stephen Kim: Great. Good morning. Yeah. So, I guess what we're hearing is all very consistent across the board and not terribly surprising. You guys are in a really great position, obviously. What’s, obviously, on people's minds these days though, is the moving rate. And you guys have a very unique niche in the market and you cater to a particular kind of buyer. My general sense would be that your buyer is not going to be nearly as in rates that were to transmit into the mortgage rate as folks that may be a little bit lower down on the price point curve, but I would love to hear you articulate what you anticipate would be the hypothetical or the demand response? If you were to hypothetically see mortgage rates jump, let's say 50 basis points over the course of it just – it really rapidly, like within a, you know, a month or two, how, you know how – what kind of reaction and what kind of timeframe to that reaction do you think we would see? Douglas Yearley: Sure. More than happy to answer that question. I know what's on everyone's mind. A quarter point on a $500,000 mortgage is $67 a month. I'm not worried. I think made it clear yesterday. I think the administration has made it clear. They find homeownership to be extremely important to be a priority. You know, they've talked about a $15,000, first time, homeowner tax credit. I think you will continue to see relatively low rates, and a move of a quarter point, even a half point, if we get to the mid-3s, if we get to the high-3s in this market, I'm just not worried. The impact to our buyer is just not that significant. There are so many other factors that now take priority over a modest . And it's the things we talked about, the tightness of the resale market, the importance of home, the desire for choice. Our buyers have a very low LTV, 69%. 17% of our buyers are all cash. They're benefiting from tremendous equity in their existing home. I mentioned 75% of our buyers have a home to sell. They never thought they'd have the equity they have now. When I went through those stats about the number of homes that are trading within two weeks and trading over asking price, and they're invested in markets that have performed well. They're wealthier, and we've always seen that while – I'm not going to minimize rates, I know it's one of the levers, it's important, but I'm just not worried right now from the of the Fed, from where I think the Biden administration stands on homeownership, and from the makeup of our buyer. I think we're okay. Now, if rates, you know, if they move into the fours or above, that could be a different conversation, certainly. But right now, with a rate that was two and three quarters and has moved to three, even I feel good and I think there's so many other things in our favor, that we're in really good shape. Stephen Kim: Yeah, indeed, there's always something to worry about, after all, but yeah, I agree with you, you do – your buyer certainly seems well equipped to handle a move like that in rate. I wanted to talk a little bit more about the – if you could segment your typical buyer for us, I'm curious as to what you're seeing in terms of – if you could just, I know we've talked about in the past, but if you could just give us a sense for how the younger portion of your buyer pool has responded over the course of the last, let's say six months versus the older portion of your buyer pool, whether they are processing the pandemic and their life choices around housing differently in your view, and different in a way that you think is going to be different going forward, you know, but something that's a little bit more permanent in their thinking? For example, the older buyer had been – we had been hearing more interested in, you know, coming in closer to the city, we have amenities, access to amenities and so forth. And we have been hearing that the younger buyer and this is, you know, in previous years was sort of deferring, you know, making the move out to the , I would imagine a lot of that’s change. I would just love to hear you articulate what you're seeing at the older end, versus the younger end of your buyer spectrum? Douglas Yearley: Sure. So, affordable luxury, which is primarily focused on the millennials, is the fastest growing and best performing part of our business. Whenever you come down in price, you have more buyers, and as we have more offerings at lower prices, this is what we predicted and returning those houses faster and they're generating very high ROE’s and actually are exceeding our gross margin underwriting significantly. So that buyer pool of 70 million to 75 million millennials with I think the number one birth year being the is absolutely out in the market and we are benefiting from that, because as we've talked about, they are buying later in life than the boomers and they're therefore wealthier. And so, affordable luxury is their three series BMW that can be their first home. And that is a tremendous growth opportunity for our company. As a move up buyer, which of course is our bread and butter and what built the company is performing very, very well. The resale markets as we talked about are so hot that they can sell their house quickly for more than they ever thought, giving them the opportunity to move up. The active adult, 55 and over buyer has been slower as they've been more careful to venture out during the pandemic, because they've been a bit more at risk. As the vaccine is being offered to that demographic first, we are seeing that action pick up significantly. Operator: Our next question comes from Alan Ratner from Zelman & Associates. Please go ahead with your question. Alan Ratner: Hey, guys, good morning. Congrats on the great results. Douglas Yearley : Good morning. Alan Ratner: Thanks for all the great information and color. I'd love to first talk a little bit about, you know, digging a little bit more about the land underwriting strategy and standards, I think you guys kind of walked through how you're thinking about that part of the business a bit differently, and certainly makes sense. You know, one of the things we've heard from a lot of builders is, you know, they're tying up larger land deals, you know with the strengthened demand, obviously, you don't want to end up with a community that you burned through in 6 months, or 12 months, and others, you know are moving further out. And that's obviously not your bread and butter. But within the context of the more of the off balance sheet, how are you thinking about the other components of land? You know, the absorption rate, for example, you're pretty close to company peak absorption. So, what are you assuming on land you're buying today going forward and gross margin? You know, how do you think about that part of it as well, taking into account all the other variables? Douglas Yearley: Sure. So, we tightened our underwriting significantly. We look at gross margin, and we look at – internally we call it , but it's obviously connected to ROE. And about a year before the pandemic, we started focusing on it. And then during the pandemic, we increased the underwriting standards even higher. I am comforted that we continue to see good deal flow. We're just restructuring the deal terms either with the seller, or there's less cash out front and we pay over time. We're doing significantly more third party land banking, where we assign a contract to a professional land banker, who then feeds us land back on an as needed basis. And then we're doing joint ventures with either Wall Street private equity, or with our friends in the homebuilding industry, the other builders. So, we love the larger deals. And in the old days, we would have grabbed an entire 1000 lot master planned community, at the and we understand that that we built the company, and good markets rewarded us. And we now recognize that the smarter way to go is to call off one of our friends and split it, and put it off balance sheet in a joint venture, get project level financing. And yes, we get half the lots. We get 500 instead of a 1,000, but we are comfortable that they're going to have, our partner is going to have another opportunity, like the one we offered them, that they will offer back to us. And here's the good news. All the other builders want Toll Brothers to be the partner. We are the whole foods of the shopping center. We take the price higher. And they certainly like that. And they like the way we market and our model homes and the action that we get. So, we're in favor, and that really helps us with deal flow. So, it's really all of those components, the most important of which is an unrelenting absolute focus on these new underwriting returns that I will not waver from. Marty Connor: Alan, I would add that there is more capital coming into the space to land bank or land to the joint ventures we form with the other builders. And those other builders are also focused on a return on equity. So, are looking for chances to share, as Doug mentioned. Alan Ratner: No. That’s very helpful. I appreciate that. And I think it makes a ton of sense, especially with your price point that you would be a logical partner for a lot of companies. I guess what I'm trying to figure out though is as these new land deals that you're tying up, ultimately turn into communities that you're selling homes and then delivering homes and how is the performance of those communities going to look different based on, you know, the composition of the underwriting? So, are these going to come in as a lower gross margin because they are more capital efficient? Are they going to absorb at a higher pace perhaps because for one reason or another based on where you're underwriting at, or you know, is it still going to deliver a pretty similar performance that the wholly-owned deals you've been doing for decades generate as well? I’m just curious if there's any notable differences that we should be thinking about? Douglas Yearley: There are not notable differences, except the ROE will be higher than some of the legacy lands. And when you land bank and you pay a land banker, you know, 9%, 10%, 11% to carry the land that could certainly have some pressure on gross margin. Marty Connor: Generally the bank financing is not much different in terms of cost than the public bond financing we've enjoyed. So, it's really just the land banking deals that show a little pressure on the gross margin. Douglas Yearley: I think that the joint venture deals should not. The better terms with land seller should not. The land banking deals will have some pressure, but again, we have increased the underwriting metrics to take a lot of that into account. Because I'm not going to compromise margin by that much. Alan Ratner: Do you have a rough split of the breakout of, you know, land you're tying up today? What's land bank? What's JV? What's traditional option? Just curious if you can give us a rough splits there? Marty Connor: I don't think we are prepared to share that at this point, Alan. I think I'm pretty pleased with the significant progress we've made moving our option land up to 46%. Over the past couple years, we've land banked 17 deals, which is nearly $800 million of , 85% of which is shifted to the land backer until we need to launch just in time. As we look into 2021, there's another half dozen deals for $150 million, 85% of which is deferred. Alan Ratner: Got it. That's very helpful. I'm going to try to sneak in one quick one before I go. Marty, you know, in the past, you've been somewhat value conscious on the buyback, you know, very opportunistic when the stock has gotten kind of in the lower one times book range, and you've stepped it up quite a bit this quarter as well. Should we expect that same approach going forward or is it going to be a little bit more programmatic now? It sounds like maybe, you know, just the return focus. Perhaps this is something that that's going to be a little bit more agnostic devaluation or am I thinking about that wrong? Marty Connor: I think it's going to be more programmatic. We hope not to have the opportunity to be opportunistic. Alan Ratner: Got it. Thanks a lot, guys. Good luck. Douglas Yearley: Thanks Alan. Operator: Our next question comes from Mike Dahl from RBC Capital Markets. Please go ahead with your question. Mike Dahl: Thanks for taking my questions. Good stuff there. Wanted to follow up on the environment from a mortgage standpoint, but less about rate and more about the appraisal side and just given how rapid some of the price increases have been on the new home side and the existing home side. Just curious, are you starting to hear anything about appraisal issues in the field, or do you think by and large appraisals given the, you know the tightness in the market and the strength that's broad based have kept pace with what’s happening on the price side? Douglas Yearley: Great question. I just asked the ops team nationwide yesterday and we are not having any appraisal issues around the country. We do list and we get our homes offered for sale and our closings into the MLS rapidly. So, the appraisers have an opportunity to see comps pretty quickly that are in the MLS. Obviously the strength of the resale market, and the increase in prices in the resale market is helping us. So, so far, we're okay. Mike Dahl: Okay. Marty Connor: Our mortgage group does a nice job of working through any of those sorts of issues, kind of before they arise too. It's nice to be our own comps and to control the mortgage process. Mike Dahl: Got it. And just a quick follow up on that. And similar in terms of your customers that have a home to sell, no appraisal issues on their end either, in terms of getting the full comp? Douglas Yearley: We have not heard that. Mike Dahl: Okay. My second question, just because I think, you know, potentially there might be a little sensitivity it seems to your earlier comments talking about the non-binding and I just wanted to kind of frame that up, you obviously highlighted some of the weather issues that have been widespread, but also I think the comps throughout your fiscal second quarter, there's quite a dramatic difference in terms of the first half of the quarter versus the second half of the quarter, which was down I think by two-thirds year-on-year. So when, you know, when we're thinking about sales pace for the quarter, you just did, kind of a three-month in fiscal 1Q, you'd normally be up sequentially in Q2, which would imply, obviously, well, north of that, you know, mid-30s range that you quoted for non-binding, is that a fair way to think about kind of sequential based and what you're seeing right now is maybe just a function of comps and weather? Douglas Yearley: Well, I’m delighted with 34% deposit growth, 37% same-store, delighted. We have one-third of our communities on allocation. We have effectively closed for a month and then we reopened two homes sites on the first Saturday of a month and have 30 people interested and raised the price and take 2 by 11 in the morning and shut her back down. So – and we’re doing that to drive price. We’re doing that to make sure we have roads in front of lots. We’re doing that to manage extended backlogs where . So, considering the business right now, our ability to drive price, our price was up significantly in Q4 and even more in Q1 of 2021. We have great pricing power. We’re taking advantage of it. We’re managing our backlogs. And we had horrible weather for two weeks in many parts of the country where we operate. So, I am – that’s one of the best metrics I’ve looked at is being up 37% for these past three weeks. And remember, from mid-March until mid-May, we really got hurt by COVID last year, because we didn’t have those starter houses that the other builders had finished specs where the renter could move into a finished home in a month or two for the same monthly payment. So, just remember, the second quarter comp is very easy for us as we move forward. I know that wasn’t your question, but I’m just reminding everyone of that. But in terms of your question as, you know how I should look at the last three weeks, very, very pleased. Mike Dahl: Okay. That makes sense. And yes, the comps certainly cognizant of that. That was actually more of what I was asking. All that makes sense and track, you know market can just be sensitive to any kind of deceleration versus what you just put up. But I think – I guess, that still seems to be attracting tourists and incredibly strong quarters. So, thanks and good luck. Douglas Yearley: Thank you. Operator: Our next question comes from Susan Maklari from Goldman Sachs. Please go ahead with your question. Susan Maklari: Thank you. Good morning, everyone. Douglas Yearley: Good morning, Susan. Marty Connor: Good morning, Susan. Susan Maklari: My first question is just, you know you commented on some of the work you’re doing around the cost structure looking at the broker policy spend in there. Can you give us a little more color on that and maybe how we should be thinking about that flowing through over time? Douglas Yearley: Sure. So, traditionally third-party brokers represented about 60%, 65% of our sales. The client comes in with a realtor and we paid between 2.5% and – between 2% and 3% depending upon the local market to that third-party realtor. We have kept an eye on our competition, what the other new homebuilders are doing. We have kept an eye on the number of clients that now come in without a broker. And where appropriate – we’re not a pioneer in this regard, we’re certainly not going to lead, but when appropriate based upon what other builders are doing and what local market conditions are, we are lowering that third-party broker commission. And that of course drops right to the bottom line. Marty Connor: Sometimes that lowering is what it’s applied to. It may be applied just to the base house when in the past it was applied to the total sale price. In other cases, it may be base house plus structural options, but not interior options. So, we’re getting more standardized around the country in it being applied to the base house price. Susan Maklari: Got you. Okay. And then my follow-up question is, the other big topic that people have been talking about of course is inflation, and especially as we’ve seen lumber prices rising over the last couple of weeks and hitting record levels there. Can you give us some color around how you’re thinking about inflation this year? I know on the last call you mentioned you expected it to be up about 5% between labor and materials. Has that changed at all? And if so, can you just talk to some of the movements in there? Douglas Yearley: Sure. So lumber is up and we expect labor to also be up a bit more modestly because labor went up fairly significantly pre-COVID. And so, we really just haven’t seen the labor number go up all that much more. But we are very confident that we have properly budgeted in our backlog and in our future sales for additional contingency to cover the lumber prices we’re seeing, plus increases in labor and other materials. So, when we talk about our gross margin in the second half of the year and then even higher gross margin in 2022 because of the 9 months to 12 months build time and the higher pricing power we’ve had recently, that is also building in what we think our proper contingencies to the cost side. Susan Maklari: Got you. Okay. All right. So, it sounds like, generally speaking, maybe a little higher than that 5% or so, but nothing that you can’t offset with the pricing? Marty Connor: Price increases have been able to offset what we’ve seen and what we expect to see in lumber, labor, and materials. Susan Maklari: Okay, all right. Thank you, guys. Good luck. Marty Connor: Actually more than offset, Susan. Sorry about that. More than offset, which is why we’re showing the gross margin improvement. Susan Maklari: Yeah. Okay. That makes sense, Marty. Thanks. Operator: Our next question comes from Jade Rahmani from KBW. Please go ahead with your question. Jade Rahmani: Thank you very much. Are you seeing a pick up on the New York on those sales side? It seems like City Living contracts improved, but not sure how that plays out in terms of the number of joint ventures that you have versus what’s wholly-owned? Douglas Yearley: We are. We have 33 agreements in the first quarter coming out of New York City, five buildings and that includes Jersey City, Hoboken and Manhattan, and that’s similar to the sales we had a year ago pre-COVID. So, I’m very pleased with the improvement we’ve seen in New York recently. Jade Rahmani: Thank you. And then just as a follow-up. Can you remind us how much capital is currently invested in each of the City Living and Apartment Living businesses and what you expect over the next 12 months? Just trying to keep track of all the joint venture announcements that have been made recently, it seems like you’re continuing to make a lot of progress there? Marty Connor: Sure. In City Living, we have approximately $377 million invested. $31 million of that is joint venture, $144 million is on balance sheet deals that are essentially fully completed and we’re just in the sell out phase and $200 million is for land that we own for future projects. In our Apartment Living business, it’s $700 million. That’s made up of around $6 million in stabilized apartment projects that actually have an unrealized gain somewhere between $75 million and $100 million. There is $122 million in projects that are in lease-up and we will refinance out quite a bit of that when it gets to a stabilized level. And then there is $557 million in deals where we are soliciting other joint venture partners. Douglas Yearley: And we believe that $700 million comes down to $400 million to $450 million as we sell stabilized properties and as we put land into joint ventures with third-parties where we only keep 25% of the equity and when we refinance other properties. Marty Connor: That should happen over the next 12 months to 24 months. Jade Rahmani: Thank you very much. Douglas Yearley: You’re welcome. Thank you. Operator: Our next question comes from Nishu Sood from UBS. Please go ahead with your question. Nishu Sood: Thanks. I wanted to ask about the cash flow generation in the 2021. After generating $1 billion last year, understand it was just given the volatility, $750 million is an impressive number for 2021, especially considering how much backlog you have to build out, just how strong your demand is generally running and obviously the land investments increasing as well. Can you just walk us through the kind of components there of land and inventory flow that would get you to that $750 million? Marty Connor: Well, I think it’s really a function of the income we’re generating, some of the liquidations we talked about of some of the non-core assets and then the restructuring in the way we’re buying land to buy it later and just in time. So, all those things give us the confidence for that kind of projection. We’re still going to spend $1.1 billion to buy land. We’re still going to spend $1.1 billion to $1.2 billion to develop that land, but even after all that, we’ll have $750 million of positive cash flow. Nishu Sood: Got you. Got you. And second question was just on the – Doug, you mentioned earlier, a third of your community is on allocation, obviously, a good issue to have. Given that the communities are selling out faster than expected, does that increase as the year goes on here? I mean, obviously, the sales pace continues to just run very, very strong. And how much of a governor does that become on your absorption pace as we go through the next couple of quarters? Douglas Yearley: Yeah. We’re just focused on bringing demand down to the right level to be able to build through it, and our backlog is up 38%. We’re comfortable that that can be built too. Right now we’re at a low-30 per year average community settlement taste. This company has been in the high-30s historically. So, we have the capacity to manage this growth by building it efficiently and delivering homes within the timeframe that we have represented to the client, but we certainly recognize that this 50%, 60%, 80% order growth will come down. Part of that is through allocation. Part of that is through continued price increases. So, I’m very confident that – again, the second quarter is a very easy comp. So that number is going to be distorted. That order growth will be distorted. But as we get into the back – the latter part of the year, you’re going to see that order growth come down to the level that we’re extremely comfortable with. We have some new operations that have opened recently in some new markets where since the base is so low, because we just opened, you can show pretty significant order growth and still build to it because it’s a bit of a start-up or it’s only a couple of years old. And so that factors into some of these numbers. But overall, we keep a keen eye on it. And I think we’re doing exactly the right thing with certain communities being allocated. And we’ll continue to focus as we move forward, balancing price with pace. And I will mention that the community count growth we have mentioned assumes this continued strong pace. So, we have the land even with selling out faster than we had anticipated to grow this company by the numbers that we represented both in 2021 and we have the land and we know we will buy more land and we may even buy a builder or two as we’ve done in the past to grow to . But we have the land today to match that growth that we talked about for the balance of 2021 through 2022. Nishu Sood: Got you. That’s helpful. Thanks so much. Douglas Yearley: You’re welcome. Thank you. Operator: Our next question comes from Jack Micenko from SIG. Please go ahead with your question. Jack Micenko: Hey, guys. Thanks for fitting me in. Wanted to take this conversation to the inventory house side. You talk about – so let’s talk about traditional Toll versus more lifestyle affordable luxury or new Toll or however you want to classify it. What’s the mix of communities today? Where does that go in 2021, 2022? How much shorter cycle time is there between the traditional Toll product and more of the affordable luxury? Can we use the 25% first-time buyer as a proxy for that mix? I mean, I’d imagine you probably have some empty nester move downs into that product too. Just trying to – because it’s part of the ROE conversation, just understanding the actual mix of inventory, where it’s been, where it’s headed and how to think about that? Douglas Yearley: Sure. So, Marty is going to give the mix, but I’ll quickly answer your question on cycle time. Affordable luxury is running about 35 days faster shorter cycle time than our traditional business, and that’s getting even better as we get better at that business. But I will also say, even with the traditional luxury business, the bigger homes, because of this optimization rationalization of plans we’ve talked about and streamlining some systems in the field, even with the tighter market, we are continuing to see our cycle time come down in that business. We mentioned last quarter, it was down and it’s down even more today. Marty, can you give the mix? Marty Connor: Sure. So, affordable luxury this year is around 42% of communities. It should grow to 46% next year. Luxury is around 37% of communities this year and will go down to 30% next year. And active adult is at 21% this year and 24% next year. Douglas Yearley: And I want to point out, affordable luxury still has choice. That Toll advantage we’re so proud of, of choice still applies to affordable luxury. Jack Micenko: Got it. Got it. I’ll leave it there because we’re at 9:30. I’ll pitch offline. Thanks guys. Douglas Yearley: Thank you. Marty Connor: Thanks, Jack. Operator: And our next question comes from Jay McCanless from Wedbush Securities. Please go ahead with your question. Jay McCanless: Hey, just quickly, if lumber prices were to fall instead of continuing to move higher, how quickly could you all realize some of those savings in the gross margin? Douglas Yearley: Very quickly. Marty Connor: I think it’s 6 months to 9 months out that we’d start to see the benefit because the houses that are in production already have the lumber contract before. Douglas Yearley: Yeah. I meant on the net sales. Of course, if the framers are out there – if the lumber has been bought, obviously not. But in terms of the next home sold, you’re going to see it right away in the margin because that lumber doesn’t hit for a number of months. Marty Connor: Yes. You’ll see it in our projections and our budgets almost immediately. But remind you, 12 months later is when it gets through the income statement. Douglas Yearley: Of course, since it takes that long to build. But if the lumber has not yet been contracted for then we’re going to obviously take advantage of it quickly. We used to contract long-term for lumber and tie it up in the old days. And now, we’re working off with the shortest possible contracts we can so that we can be nimble and take advantage of lower pricing when it comes. We also have our panel and trust plants that handle the Midwest, Northeast and Mid-Atlantic operations. Those plants are all on rail lines where we’re buying lumber direct by the railcar out of Pacific Northwest and out of the Southern states of the U.S. And I think we’re able to – because we’re in that business, we have I think a little bit more visibility and the opportunity to manage those markets even better. Jay McCanless: Okay, great. Thanks for fitting me in. I appreciate it. Operator: And ladies and gentlemen, with that, we will end today’s question-and-answer session. I’d like to turn the conference call back over to management for any closing remarks. Douglas Yearley: Jamie, thank you very much. Thanks everyone. We appreciate very much your interest. And stay warm for those of you that are in places like Philadelphia. Have a great week. Thanks. Take care. Operator: And ladies and gentlemen with that we’ll conclude today's conference call. We thank you for attending. You may not disconnect your lines.
Toll Brothers, Inc. (NYSE:TOL) Showcases Luxury Homes and Stock Activity
- Toll Brothers, Inc. (NYSE:TOL) is a leading builder of luxury homes in the U.S., with a strong presence in over 60 markets across 24 states.
- The grand opening of the Frida model home at Nola at Escena in Palm Springs highlights the company's commitment to luxury and modern design.
- Recent stock activity saw Senior Vice President and Chief Accounting Officer Michael J. Grubb selling 500 shares, with the stock price reflecting a slight increase.
Toll Brothers, Inc. (NYSE:TOL) is a prominent builder of luxury homes in the United States. The company is known for its high-end residential properties and has a strong presence in over 60 markets across 24 states. Toll Brothers offers a variety of services, including architectural, engineering, mortgage, and land development. The company has been recognized as one of Fortune magazine’s World's Most Admired Companies for over a decade.
The grand opening of the model home at Nola at Escena in Palm Springs, California, is a significant event for Toll Brothers. The Frida model home showcases innovative architecture and a blend of luxury and modern desert design. This aligns with the company's reputation for offering luxurious lifestyles, as highlighted by Brad Hare, Division President of Toll Brothers in Southern California. The homes at Nola at Escena range from 2,277 to over 2,402 square feet, with prices starting at $1.24 million.
In recent stock activity, Michael J. Grubb, Senior Vice President and Chief Accounting Officer of Toll Brothers, sold 500 shares of Common Stock at $120 each. This transaction was reported on Form 4, filed on July 15, 2025. Following the sale, Grubb holds 2,439 shares of the company's Common Stock. The stock for TOL is currently priced at $116.03, reflecting an increase of 1.98% or $2.25.
TOL's stock has shown some volatility, with a trading range between $113.52 and $116.35 during the day. Over the past year, the stock has reached a high of $169.52 and a low of $86.67. The company's market capitalization is approximately $11.39 billion, indicating its significant presence in the luxury homebuilding market. Today's trading volume for TOL stands at 1,030,058 shares, reflecting active investor interest.
Toll Brothers, Inc. (NYSE:TOL) Maintains Strong Position Despite Market Challenges
- RBC Capital maintains an "Outperform" rating for Toll Brothers, Inc. (NYSE:TOL), adjusting the price target from $139 to $133.
- Despite a decrease in earnings and revenue projections, Toll Brothers increases its quarterly dividend, showcasing financial stability.
- The luxury homebuilder faces challenges from high mortgage rates and the Federal Reserve's rate outlook but remains a significant player in the luxury housing market.
Toll Brothers, Inc. (NYSE:TOL) is a prominent homebuilder specializing in luxury homes. The company is known for its high-end residential properties and operates primarily in the United States. As a leader in the luxury housing market, Toll Brothers competes with other major homebuilders like PulteGroup and D.R. Horton. These companies also face challenges in the current economic climate, including high mortgage rates and affordability issues.
On May 20, 2025, RBC Capital maintained its "Outperform" rating for Toll Brothers, with the stock priced at $105.73. Despite the challenges in the housing market, RBC Capital's analyst Mike Dahl adjusted the price target from $139 to $133, reflecting a cautious yet optimistic outlook. The stock has seen a 15% increase over the past month, although it remains down 15% year-to-date.
Toll Brothers is set to release its second-quarter earnings results, with analysts expecting earnings of $2.86 per share, down from $4.75 per share last year. The projected quarterly revenue is $2.49 billion, a decrease from $2.84 billion a year ago. Despite these declines, the company recently increased its quarterly dividend from 23 cents to 25 cents per share, indicating confidence in its financial stability.
The company has exceeded earnings expectations in three of the past four quarters, with a fiscal year 2025 EPS consensus of $13.72. Revenue is projected to slightly decrease to $10.71 billion. Toll Brothers faces the challenge of maintaining its gross margins while affordability in core markets is stretched. The Federal Reserve's rate outlook continues to impact demand in the luxury housing market, affecting new order activity.
Investors are also considering Toll Brothers' dividends, with an annual yield of 0.93%. To earn $500 monthly from dividends, an investment of approximately $643,560, or around 6,000 shares, would be required. The stock's current price is $105.30, with a market capitalization of approximately $10.47 billion. Despite the challenges, Toll Brothers remains a key player in the luxury homebuilding sector.
Toll Brothers, Inc. (NYSE:TOL) Stock Analysis: A Deep Dive into Financials and Market Expectations
- The consensus price target for Toll Brothers, Inc. (NYSE:TOL) remains stable at $155, reflecting steady analyst confidence.
- Wells Fargo analyst sets a cautious price target of $82 ahead of the company's second-quarter earnings release.
- Toll Brothers showcases a significant financial growth with a revenue CAGR of 12% from 2014 to 2024.
Toll Brothers, Inc. (NYSE:TOL) is a prominent builder of luxury homes in the United States, operating through two main segments: Traditional Home Building and City Living. Beyond home building, Toll Brothers is involved in developing golf courses, country clubs, and rental apartments. Founded in 1967, the company is headquartered in Fort Washington, Pennsylvania.
The consensus price target for Toll Brothers has remained stable at $155 over the past month and quarter. This stability suggests that analysts have maintained their outlook on the company's stock performance in the short term. However, Wells Fargo analyst Deepa Raghavan has set a lower price target of $82, indicating a more cautious view ahead of the company's second-quarter earnings release.
Over the past year, the average price target for Toll Brothers has increased from $146 to $155. This positive shift in analyst sentiment may reflect confidence in the company's strategic initiatives and market position. Despite this, analysts are predicting a decline in earnings for the upcoming financial report, as highlighted by Zacks.
Toll Brothers has demonstrated significant financial growth, with revenue rising from $3.9 billion in 2014 to $10.8 billion in 2024, achieving a compound annual growth rate (CAGR) of 12%. The fair value of Toll Brothers' equity is estimated at $200 per share, indicating an 85% potential upside from the current market price of $108. However, the company faces challenges such as high reinvestment needs and fluctuating free cash flow growth.
Investors should keep an eye on market conditions, company performance, and industry trends that could influence Toll Brothers' stock target price. The upcoming earnings report will be crucial in assessing the company's performance and potential for generating returns. As the report date approaches, investors should be prepared for the expectations set by analysts like Deepa Raghavan.
Toll Brothers, Inc. (NYSE:TOL) Earnings Preview: A Closer Look at Expectations
Toll Brothers, Inc. (NYSE:TOL) is a prominent home construction company in the United States, known for its luxury homes. As the company prepares to release its quarterly earnings on May 20, 2025, Wall Street analysts have set their expectations for an earnings per share (EPS) of $2.86 and projected revenue of approximately $2.49 billion. The anticipated EPS of $2.86 for the quarter ending April 2025 represents a 15.4% decline from the same period last year, as highlighted by Zacks Investment Research. This decline is attributed to a decrease in revenue, which is expected to reach $2.49 billion, marking an 11.8% drop from the previous year.
Despite these challenges, the consensus EPS estimate has remained stable over the past month, indicating that analysts have not revised their projections. The fair value of the company's equity is estimated at $200 per share, suggesting an 85% upside potential from its current market price of $108. This positions Toll Brothers as an attractive investment opportunity for shareholders.
The company's financial metrics further highlight its potential. With a price-to-earnings (P/E) ratio of approximately 7.11, Toll Brothers is valued relatively low compared to its earnings. Its price-to-sales ratio of about 0.98 and enterprise value to sales ratio of around 1.20 reflect its market value in relation to sales. Additionally, the company maintains a strong current ratio of about 4.24, indicating good short-term financial health and liquidity.
As the earnings report approaches, the market is closely monitoring how Toll Brothers' actual results will compare to these estimates. The management's discussion during the earnings call will be crucial in determining the sustainability of any immediate price changes and future earnings expectations. If Toll Brothers exceeds expectations, the stock might see an increase, while falling short could lead to a decline.
Toll Brothers Shares Drop 7% as Q1 Earnings Miss, Housing Market Uncertainty Weighs
Toll Brothers (NYSE:TOL) fell nearly 7% intra-day today after the luxury homebuilder reported weaker-than-expected first-quarter earnings, with revenue and profit missing analyst projections.
For the quarter, earnings per share came in at $1.75, below the $2.04 consensus estimate. Revenue reached $1.86 billion, falling short of Wall Street’s $1.91 billion forecast.
Despite a 3% year-over-year increase in home deliveries to 1,991 units, the average home price dropped 7.8% to $924,600, reflecting pricing pressures in certain markets.
Toll Brothers' CEO noted that while demand remained solid, the spring selling season has been mixed, with affordability constraints and growing inventories in some markets dampening sales—particularly at lower price points. However, the company emphasized continued strength in high-end markets.
The homebuilder maintained its full-year outlook, expecting to deliver between 11,200 and 11,600 homes at an average price of $945,000 to $965,000, signaling confidence in stabilizing demand despite market fluctuations.
Toll Brothers Shares Drop 7% as Q1 Earnings Miss, Housing Market Uncertainty Weighs
Toll Brothers (NYSE:TOL) fell nearly 7% intra-day today after the luxury homebuilder reported weaker-than-expected first-quarter earnings, with revenue and profit missing analyst projections.
For the quarter, earnings per share came in at $1.75, below the $2.04 consensus estimate. Revenue reached $1.86 billion, falling short of Wall Street’s $1.91 billion forecast.
Despite a 3% year-over-year increase in home deliveries to 1,991 units, the average home price dropped 7.8% to $924,600, reflecting pricing pressures in certain markets.
Toll Brothers' CEO noted that while demand remained solid, the spring selling season has been mixed, with affordability constraints and growing inventories in some markets dampening sales—particularly at lower price points. However, the company emphasized continued strength in high-end markets.
The homebuilder maintained its full-year outlook, expecting to deliver between 11,200 and 11,600 homes at an average price of $945,000 to $965,000, signaling confidence in stabilizing demand despite market fluctuations.
RBC Capital Boosts Toll Brothers Price Target Following Q3 Earnings
RBC Capital analysts raised their price target for Toll Brothers (NYSE:TOL) to $150 from $143, reiterating an Outperform rating on the stock following the company’s reported Q3 earnings. The updated outlook reflects a marginal 1% increase in fiscal 2025 earnings per share (EPS) estimates, now projected at $14.16. The revision is driven by stronger home deliveries and higher average selling prices (ASP), which more than offset pressures from weaker margins.
While management attributed a weaker first-quarter gross margin percentage to product mix, the analysts noted that investor skepticism could persist until the anticipated rebound in the second quarter materializes. Short-term demand trends have exceeded typical seasonal patterns, and the company has started to scale back some of the enhanced incentives implemented previously.
Despite broader caution regarding the interplay of demand and incentives, Toll Brothers continues to stand out for its strategic positioning and robust return profile. The revised price target signals confidence in the company's ability to navigate current challenges and deliver long-term value.
