Toll Brothers, Inc. (TOL) on Q2 2021 Results - Earnings Call Transcript
Operator: Thank you. Good morning and welcome to the Toll Brothers Second Quarter Earnings Conference Call. All participants will be in listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Douglas Yearley, CEO. Please go ahead. Douglas Yearley: Thank you, Joe. Welcome and thank you for joining us. 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. Before I begin, I ask you to read the statement on forward-looking information in our earnings release of last night and on our website. I caution you that many statements on this call are forward-looking based on assumptions about the economy, world events, housing and financial markets, the impact of the pandemic, interest rates, inflation, and many other factors beyond our control that could significantly affect future results. Marty Connor: Thanks, Doug. Good morning, everyone. We had a terrific quarter. Our business continues to fire on all cylinders, especially our production teams out in the field. We delivered 2,271 homes at an average price of approximately $809,000, generating record second quarter homebuilding revenue of $1.84 billion. Deliveries were up 18% in units and 21% in dollars compared to one year ago. Our second quarter pre-tax income was $169.8 million, compared to $102.1 million in the second quarter of 2020. Net income was $127.9 million or $1.01 per share diluted, compared to $75.7 million and $0.59 per share diluted one year ago. Douglas Yearley: Thank you, Marty. To wrap it up, we continue to believe that with our strong land position, our plans to grow community count this year and next and the wide variety of homes that we offer in 24 states and 50 markets we are very well positioned to capitalize on the extraordinary demand we are seeing in the housing market. And with the structural changes we have made and continue to make in how we operate, including our relentless focus on capital efficiency, returns and internal operating efficiencies we believe that our results will continue to improve in both the short and long-term. Before I open it up to questions, I want to remind all of you of our upcoming virtual Analyst and Investor Day that we will be hosting next Wednesday, June 2 starting at 11:00 a.m. Eastern Time. We will showcase many of our team members, products and our communities and you will become much more familiar with our operations and our culture and we hope you will come to understand what makes Toll Brothers such a special company, and how much we have evolved in the past decade. I'm really looking forward to it and I hope you'll be able to join us on Wednesday. I'd also like to encourage you to take a look at our recently released ESG report, which is now available on our website. This is our first report and it includes important information regarding the many initiatives we have taken with respect to ESG. And finally, I'd like to thank all of our Toll employees for their contributions to our great results this quarter. We couldn't have achieved these results without your hard work, dedication and commitment to providing our customers an experience unmatched in the homebuilding industry. With that, Drew, let's open it up for questions. Operator: We will now begin the question-and-answer session. As a reminder, the company is planning to end the call at 9:30 when the market opens. . The first question comes from Mike Dahl with RBC Capital Markets. Please go ahead. Chris Kalata: Hi. This is Chris Kalata on for Mike. Thanks for taking our questions. My first question is just on the assumptions behind the greater than 20% ROE expectation for 2022. Obviously, the strength in sales and margins, they're driving much of that improvement. But are you assuming any benefit if at all on buybacks or benefits from balance sheet repositioning? Marty Connor: I think there is modest benefit assumed from that. The big drivers of that expansion in ROE are revenue growth and gross margin. Chris Kalata: Understood. And I know you guys said you didn't want to provide 2022 guidance. But I know last quarter you guys spoke to expecting gross margins above 25% in the first half of the year given the strength and the exit rates expected this year. Any update you'd be willing to provide on what you're expecting specifically for the first half on gross margins? Marty Connor: I think in the prepared remarks I mentioned that our -- the math leads you to 25.4% as the gross margin for our fourth quarter and we expect it to be higher than that in 2022. Douglas Yearley: And I'll refer you Chris back to my comment in my prepared remarks, when I said, our gross margin for 2022 and I'm reading will significantly exceed 2021. Chris Kalata: Understood. Fair enough. Thanks for taking my question. Marty Connor: Thank you. Operator: The next question comes from Stephen Kim with Evercore ISI. Please go ahead. Stephen Kim: Yes. Thanks guys. I appreciate all the color. Exciting times out there and a lot of changes in terms of the way builders are pricing given the scarcity of supply and you all have obviously got a lot of experience with selling scarcity to your customer base. But this -- the options and the sealed bids that we've kind of been hearing about as well as some builders putting in escalators for potential increases in costs, one of the things that I've gotten from builders when they talk about those strategies is that they are concerned about the customer service blowback that implementing some of these things may generate. I've got my own views on that, but I would be curious if you could explain how you think about any potentially negative ramifications from changing -- altering the way in which you price versus the past? And then specifically with respect to escalators, cost escalators in your sales contracts. Is that something that you guys actually are doing or would consider doing or not? Douglas Yearley: Great question, Steve. I look forward to the days when we are able to sell everybody who wants a home, one of our beautiful homes, but that is not today's market. And there's precedent set of course in the resale market. When things are hot for -- the five of you have made an offer by tomorrow night at 5 o'clock we need your final invest in an envelope. And so that occurs in the housing market. We have -- as I mentioned have now gone on allocation in two-thirds of our communities because of just significant demand that far exceeds our ability to sell or our desire to sell frankly because we want to manage our growth with 58% up in backlog. And our construction teams are doing a fantastic job out there, but it is time to start taking price and managing operations, managing demand and managing growth. And so what we have done in our communities that are on allocation is basically two things. Some communities have been taking a list. And by the way, the people on that list have been prequalified for a mortgage and they're ready to go. And if we've given people a number on the list Mr. and Mrs. Smith is 20 on the list and you're number seven and at the pace we're going we think we're going to get to you in the month of July or whatever it may be that's one way. And then every couple of weeks when we offer a couple of lots, we raise the price. And we may raise it 50000. It just depends on the community. The way we've now migrated, not in all cases but in many, is those people on the list that are number seven, 12, 20, 32 say what the heck? You've taken my destiny out of my hands. You've taken the opportunity for me to buy a home away because you're not going to get to me for so long. How about the resell market? Give me the chance like they do to give you a sealed envelope with a number. And we actually have seen more people accepting of that because they can control their destiny than the people that are further down on that list and we may not get to them for a while. It's a balancing act. And I'd say it's probably right now 50-50 between working off of a VIP list in a particular order and going to final invest sealed bid. Now you may ask with 80% of your business being to-be-built, how do you do that? It's easy when you have a house. You just put the house on the market, give a base price and tell them to give you an envelope. We figured it out. If we're going to open up two or three lots on a weekend, we have our price sheet of the base price of all of the homes that you can buy from us. We have the price of the structural upgrades. And of course, we have a design studio where you can go and buy your finishes. So we bid the lot premium. We tell the clients two lots are opening up this Saturday, the minimum lot premium is 25,000. And put in your price for the lot premium. And if you win, you can then still have all the choice and the special sauce of Toll Brothers because you can then pick your home off of our price sheet at our base price and you can then go through your upgrade program. And so that's how we're doing it. I am confident we are treating the client well. We are communicating with the client. And it's working and it's maximizing price and it's controlling growth as we want to. As to your question of escalators, no, we are not adding escalator provisions to our contracts. Sorry for the long answer, but I know it's an important question and I wanted to give a detailed answer for you. Stephen Kim: Yeah. That's great. Really appreciate that, Doug. Second question relates to margins. I mean, particularly, what I'm talking about is not margins in the third quarter, but really what the margin opportunity is, as you look forward assuming that the current environment doesn't dissipate very rapidly for whatever reason. When I look back in history and I look at, let's say, the 2003 to 2005 period which is probably the most analogous time to today in terms of pricing, obviously, the bone structure was much worse back then than it is today. But pricing back then in the industry was call it got to 15%. We're now running 25% year-over-year in the resale market. So we're running much hotter than we were even then. In that period of time, you're gross margins went up about 670 basis points. I think people may have forgotten that. And I know that there are some things that would work against you from achieving something like that over the next couple of years. The ones that come to mind are your increasing affordable luxury focus as well as the material cost inflation that you're fighting against, but probably still incurring to some degree. And possibly a change in your land investment just, sort of, trying to go to a more just in time. So as we think about what you saw during that period of time in terms of pricing and the margin impacts and you assess these three things that I laid out that are sort of drags to your margin, can you dimensionalize some of those for us and help us understand how significant some of these headwinds theoretically might be to margin expansion versus the opportunity from price? Douglas Yearley: Sure. Let's start with land. Yes, as you can tell by our prepared comments and what we've been talking about lately we are structurally changing how we buy land. We are very, very focused on ROE. I know it's shining through and we're proud of it and it will continue. And it's permanent. Right now those 70,000-plus lots that we control and I mentioned it most of those lots were controlled were put under contract pre-pandemic before prices ran. So we're in a really good position where we can be selective in how we grow the land bank. And I think that is not maybe the headwind you suggested as much as it would appear for that reason. Affordable luxury which is a growing part of our business and we thought would be lower margin than our luxury business is not. Because of the strength of that market, because of the 70 million-plus millennials coming out the affordable luxury margins are right there with our core luxury business. Our move to the south, our move to the Mountain state has helped has been a tailwind to margin because those are growth areas in this country. We've had pricing power. And while one would think you go to Tampa, you go to Jacksonville, you go to Atlanta you're going to have a little margin compression not the case because of the strength of those markets and how this country is migrating. And the Pacific, California, Oregon and Seattle, there's 40 million people in California they're not all leaving. We are seeing tremendous growth 80% plus -- 85% order growth Q2 coming out of California with significant pricing power. So I'm not going to comment historically on what happened to gross margins. Thank you for being with us for that length of time. I remember those good old days, but we are certainly feeling strong tailwinds. I'm not going to speculate on where lumber goes, but Marty talked at length about how we are fully budgeted with contingencies for the building costs that have been rising. We are -- we also pushed back with our trades. If a plumber wants a price increase, it's not fair that he asked for it on a house in backlog. We sold that house to that client with that plumbers contract in place. And he will honor that contract for that price. If we need to talk about an increase on the next home sold that we can then properly budget for, that may be a fair conversation, but we fight hard to protect that backlog. And it's working. Stephen Kim: That makes a lot of sense. Thanks, Doug. By the way, I misspoke it was 670 on the operating margin not the gross. That's what I meant. But – thanks for that fulsome answer. Really appreciate it. Douglas Yearley: Very welcome. Thanks, Stephen. Operator: The next question comes from Michael Rehaut with JPMorgan. Please go ahead. Michael Rehaut: Hi. Thanks. Good morning, everyone and congrats on the results. Douglas Yearley: Hi, Mike. Michael Rehaut: Hi. So I wanted to -- my first question, I guess, I found it really interesting around the relocating buyers and in different states how that helps with consumers accepting price increases perhaps coming from higher cost states to lower cost states or coastal to inland. I was curious if you track any of those stack, for example, out-of-state buyers in Florida or some of your inner western markets relative to California. And how that might have changed -- has changed over the last year or two? Douglas Yearley: Sure. We do track it as best we can. And in those markets that are seeing more and more of the northeasterners and the Californians. And that's not the only migration right? But those are the two big ones. You've got the Boston to Washington D.C. corridor that's moving South or moving West, and you've got the Californians who are – they're moving to East somewhere, nowhere to go west. We're at about 40% of our sales in those accepting markets are people coming from what I just mentioned. Now, there's some markets that are 50%, 60%, there's others that may be lower. But that's call it about almost half, right, just shy of half of the buyers are coming from out of state. And it's – the phenomenon is fascinating. We've never seen migration like this. It obviously caught wind early in the pandemic when people thought they would be working in their sweat pants from their kitchen table forever. But it's continuing as people now realize that, well maybe, I'm not at my kitchen table every day of the week. But Austin, Texas, the pricing in Austin, which is the pricing power of Austin, which is number one in the country is driven by California. Plain and simple. The pricing power of Boise Idaho, of Reno, of Phoenix, of Vegas, of Florida, where we're in Charleston, we're in Greenville, South Carolina, Atlanta, Raleigh, Charlotte. It's the obvious market, Denver. I mean this can go on this – I need to cut it off here. So they they're moving from areas that are very expensive. The homes are expensive, that taxes are high. And it's giving us more power to raise the price without affordability issues being apparent. The traffic is holding up. Yes, a year ago, could the California have gotten one of our homes in Boise for 400 and is it now 600? Yes, but it's a $1 million house, they're trading out of in California or maybe it's $1.2 million now and it was $1 million a year ago. And so – and their monthly payment is so much less because of the tax structure. So we are very happy and we're benefiting from these migration patterns from expensive to less expensive. Michael Rehaut: That's helpful, Doug. And it's a really fascinating pattern that I think is accelerated as you're pointing out. I guess secondly, I just wanted to shift a little bit to ROE and the goal that you have set for 2022. You mentioned earlier Marty that, the big ROE drivers or improvement drivers would be revenues and gross margin. You also mentioned earlier at some point in the talk that – in your prepared remarks that you're going to become more programmatic on your stock repurchases. Just wanted to get a sense if possible, what you mean by programmatic? I mean I think it points – the stock repurchases over the prior couple of years have been somewhat sizable one quarter then more modest prior – in subsequent quarters. Should we be thinking about maybe 1 million or 2 million shares per quarter here? Something on that type of a run rate or any type of rough annual spend, any type of directional guidance would be helpful? Marty Connor: Sure. Mike, we are focused on return on equity and shareholder value now more than ever before. And the rough magnitude you outlined of 1 million to 2 million shares is probably a good entry point, particularly as we look at I'll say quarters other than the first or second, when we are generally using more cash in operations. And conversely, Q3 and Q4 is when we generate a lot more cash. So we're going to maintain some flexibility. We've been opportunistic in the past. We're going to be more programmatic in the future. Michael Rehaut: Great. Thanks very much. Douglas Yearley: You’re very welcome, Mike. Operator: The next question comes from Alan Ratner with Zelman & Associates. Please go ahead. Alan Ratner: Hey, guys. Good morning. Thanks for taking my questions. Douglas Yearley: Hi, Alan. Alan Ratner: Doug, first I'd love to maybe just expand a little bit on the out-of-state buyer topic. So very interesting the data you gave there. First, I'm curious, I might have missed it but the 40% to 50% number you gave kind of where that's running at today, what was that pre-COVID? And I guess the follow-on to that would be, I'm sure it's a little bit difficult to look at this on a weekly or monthly basis. But now that offices are starting to open back up in the Northeast and schools are not going to be remote in the fall, have you heard any chatter about that trend slowing any bid on the margin more recently? Douglas Yearley: So Alan, your first question, about 30% pre-COVID in Florida, some of these markets I mentioned that have been for some time accepting out-of-staters because of – back then it was more. It was lifestyle in Florida but places like Austin, would have been tremendous job growth. So let's call it 30% to just shy of 50% is probably the move from pre-COVID today. And you would think that we would see less migration for the reasons today than nine months ago for the reason you just described that we are not. And I don't have a great answer as to why that is. I think people for example -- and I'm of the age, where you start thinking about where is the retirement home going to be. And I just know so many people that are doing that earlier. And they're doing that while they're still working. Because they want to set it up at 55 instead of at 63 and they know they don't have to be in on Wall Street every day of every month and they can figure out it's going to be a week in Florida. I'll fly back for the next week. But I'm going to begin to set up the next phase of my life. So I think part of that is why this continues to sustain itself even as people go back to work. I know our company while we are going -- we believe we are better when we are together, and that's become a tagline of Toll Brothers as we begin to come back together, we of course, will be flexible. We're not going to be able to hire people and retain people unless we show some level of flexibility. And so I think people recognize that in most companies. And therefore, I think this migration pattern to live where you want and not where you're tethered is continuing. Marty Connor: I also think, Alan, you're seeing more companies move their operations to lower cost of operations areas. The migration of corporate headquarters to Texas is well documented. And I think you're also seeing companies while they may not move the headquarters, they see where the people are going, and they'll move a back-office or a support function to that area. So people can be in an office, if not the headquarters office as part of their workday. Alan Ratner: Got it. I appreciate those thoughts. Second, I'd love to drill in a little bit more on the shift in your spec strategy, because I think this is going to be something that's really interesting to track over the next few quarters. So, I know you not expect builder to begin with but even kind of delaying the sales of some of those homes, I would imagine at some point later this year you're going to have more specs coming to the market that are closer to completion. And I think the shift has probably been even more dramatic from some other builders. I mean some builders that are primarily built to order builders have completely shifted their sales strategies, and are effectively building up spec homes and we'll release those later in the year. And in addition, you guys are talking about 10% community count growth between now and the end of the year and other builders are as well. So, I'd love to hear your confidence and your thoughts about what the pricing power will be later this year when it seems like as this shift in sales strategy unfold and you have more inventory coming to the market, recognizing that there's a ton of demand today, but do you think the pricing power will still be as strong as it is today once all of the -- these new communities and specs ultimately get listed for sale? Douglas Yearley: Yes. So, I -- you're not going to see, what you describe as a larger number of finished specs coming to market later in the year. We actually have 1,500 specs and we define a spec -- actually we don't -- we hate that word around here. It's a QMI, Quick Move In. We had 1,500 QMIs last year, and that's defined as framing has begun. And we have 1,000 today. So, because of how hot the market is, we are actually undersupplied at the moment, but we are catching up, because we are forcing and requiring all divisions to build QMIs into their backlog every month. And so I think it's -- it will be fairly consistent, and I'm not worried about all of a sudden a lot of finished homes come to the market, and oh boy, I hope the market is still in good shape. That's -- I think it's formulaic. I think it's progressive, and I think it's fairly consistent in the number that we're starting, the number that we're selling. We just -- we'd sell a specked frame. But not today, because to sell a specked frame, the market is so hot, somebody that truly wanted a new home custom designed. Well, if all they can get is a housed frame where they can't do the custom design of the structural changes, they can only go to the design studio for the finishes. They're going to grab it. And we would rather have those people wait their turn to buy the new home and save that spec home until it is beyond drywall. Obviously, we know every single cost at that point without any issue. I mean I already gave the story about we push back on the plumber that wants a price increase on backlog. But, if the house gets beyond drywall, we're in fantastic shape when it comes to costs, but more importantly, we're riding an appreciating market and we will make more money, drive more margin improve ROE by selling that house a bit later at a higher price. And that strategy has been in place now for a while. We're just a bit more obsessed about it, and it's mandatory now that you have to hold the specked until that point. Alan Ratner: Understood. Thanks a lot. Douglas Yearley: Welcome. Thank you. Operator: The next question comes from Deepa Raghavan with Wells Fargo. Please go ahead. Deepa Raghavan: Hey. Good morning, everyone. Great quarter. Can you Doug -- hey, thanks. Doug, can you talk about your luxury spend versus active-adult, you mentioned some of that but also some of the trends you're witnessing there? Just talk about how your active-adult category, for example was pretty strong. How do you think that trend this year and next few years, and curious how that could benefit your margins or your balance sheet? Douglas Yearley: Sure. So when I break down the 85% order growth in Q2, affordable luxury was up 103%, luxury was up 48%. Each targeted empty nester the baby boomer crowd was up 135%, and the smaller City Living operation was up 171%. So affordable luxury will be the fastest growing part of Toll Brothers as we focus more and more on the 400 to 650 price point for the 35-year-old millennial and you're going to see that grow fastest and as I mentioned earlier the gross margin out of that business is now matching our traditional luxury business. So we're very, very pleased with that. We knew it would have higher ROEs because the land is less expensive and we turn houses faster because they're smaller we're just, obviously, delighted that the gross margin has been higher than we had thought. So going forward we're not giving up on luxury. And as those millennials age more and more, they're going to be buying their second and third home. It's not that far away when we've got the 42 year old millennial who is ready to move up. And so -- and that -- we worked hard on this brand. And I hope you all join us next Wednesday, because I am sure based on how hard we're working here, you are going to be blown away by some of the product, videos and photography and presentations by our management team and just how we do it. And so affordable luxury will be the number one grower, obviously, age-targeted empty nester with that boomer crowd is doing better and better because they're on the sidelines for a long time through COVID. Marty Connor: It may be in the next quarter or two the strongest performing segment. Douglas Yearley: Because of the… Marty Connor: Because of the low base from a year ago. Douglas Yearley: Correct. Right. But I know we talk about it, but we do have the widest offering in the industry. You can buy a $300,000 house from Toll Brothers and you can buy a $5 million house. And that wide offering and the wider geography with all these new markets we've mentioned is what gives us such great confidence and excitement about the outsized growth that we can achieve. Deepa Raghavan: Got it. Definitely looking forward to your Investor Day presentation. My follow-up question is what -- on pricing mostly a little bit two-part. What are your thoughts on keeping price when commodity starts to moderate? That's one part of it. Second part of the pricing question is, right now you're capping your orders per community. When do you expect to be caught up? I appreciate if you have any thoughts on when you expect to be caught up. You know your lot positions, you know what you're taking right now your intake. So you should probably have an idea when you expect to be caught up. So once you get to that equilibrium level, which enables you to lift caps would pricing then still will pricing start to get competitor? Would you start to think about probably lowering price especially when that commodity start to moderate? I mean, a couple of points there, but I appreciate any thoughts? Douglas Yearley: Sure. So we have never based the price of our homes on the cost to build them. That's not the business model of Toll Brothers and I don't believe it's a business model of many builders out there. We sell -- we do detail market comps on how much can we sell the home for? What will the market bear? What are the other new home communities by other builders selling for? What is the resale market selling for? Our business, we will drive this price as high as the client will pay. If costs moderate and we still have the demand at the levels we have today, no we're not stopping our strategy of allocation. We're not stopping our price increases or our seal bid process. It is completely based upon market demand and market pricing. With respect to when we get caught up, yeah, obviously we're moderating sales right now as we have discussed. The beauty is at the moment we control how much we sell. So we have the levers in place to decide, hey let's open five this weekend. It's all -- right now it's all internal and we can make those decisions and as this backlog, up 57% starts coming down a bit and we have a little bit less pressure on production where the next homes sold can be delivered, not in 13 months or not in 12 months, but in 10 months then you'll start seeing more and more of our communities open up as I said the way I'd like them to be where we can sell everybody else. But the pricing decisions will not be based on anything but the level of demand and the market comps. Marty Connor: And Deepa our allocation decisions are community-by-community right now, and coming off allocation will be community-by-community as well not overall company evaluation. Douglas Yearley: Right. Operator: And the last questioner today will be, Truman Patterson with Wolfe Research. Please go ahead. Truman Patterson: Hey. Good morning guys. And thanks for taking my questions. I appreciate it. So, first, I feel like, I might be beating this to death a little bit, but look, and clearly lumber costs are a big topic of conversation. It sounds like you all have a lot of confidence in your gross margins going out to 2022. As of today, spot lumber costs as of May, labor et cetera, et cetera. You all have more than enough pricing in hand today to offset all of your costs, at today's levels? And then, given, all of these bidding processes that you all have been talking about, excluding mix shift to the affordable, what do you think core pricing was up in the quarter or year-over-year? Marty Connor: I think the best way that we look at the pricing versus cost equation which is where I think you're going Truman is, to overly simplify this. We have an $800,000 home we're selling. We have a 25% gross margin. And we have around 25% of the costs that are associated with the land and improvements. And so those have been paid for previously. So it's a two-for-one kind of equation. A 2% cost increase can be offset with a 1% price increase, when you're looking at those cost increases from a labor and materials perspective. Truman Patterson: Okay. Yeah, I got that. On the core pricing, quarter-over-quarter or year-over-year, do you all have that metric? Douglas Yearley: When you say price cost or sales price? Marty Connor: Sales price, yeah. Truman Patterson: Yeah, the sales price, okay. Okay, all right. And on the affordable luxury, I know it's moved to 30% of your sales. Is this rolled out nationwide? Are there any new metros? Is there any additional expansion? And where do you think you could ultimately take that to? And Doug you made a comment, I believe in the prepared remarks about the streamlined construction process and possibly bringing these techniques to your other product segments. Could you just elaborate a little bit on that? Douglas Yearley: Sure. So, affordable luxury is now rolled out nationwide. That doesn't mean, every single one of our 50 markets has it. But it is in place around the country. We have markets that are primarily all affordable luxury, Jacksonville, Boise, as two obvious examples. We have other divisions that sell $2 million houses. And they also have a significant affordable luxury business, example, Phoenix. And you'll continue to see new markets that may be lower price. One example, we're going to announce shortly that we're kind of announcing today, but we're going to be reentering San Antonio. While San Antonio is primarily an affordable luxury market throughout, as Jacksonville is. But there's going to be other markets that we will enter, that will be both luxury and affordable. And you will see more-and-more affordable luxury in the existing footprint. With respect to cycle time, our cycle time came down again, from the first quarter to the second quarter, by about 10 days. That was a combination of our operations teams clicking. And we have restructured how we operate in the field. And more affordable luxury but by its nature we turn those houses faster. So the things we are learning, on the affordable luxury side, Marty talked a bit about optimizing our plans. And we're going to talk more about this … Marty Connor: Yeah. Douglas Yearley: … next Wednesday. We're not changing the buyer experience. We're not pulling the opportunity of choice, the opportunity to upgrade your home out. We're just optimizing the plans. We're making them more efficient. We're making them better. Better can also be less expensive, better can also mean, you can build faster. And that's what optimization is all about. So even though we're hot and we're busy, we are actually building houses faster than we ever have. And it's a combination of all those things, as I just mentioned. Truman Patterson: Perfect. Thank you, guys for the time. And good luck in the upcoming quarter. Douglas Yearley: Thank you, Truman. Marty Connor: Thanks, Truman. Operator: Just a reminder, the market is opening. So this concludes our question-and-answer session. I would like to turn the conference back over to Doug Yearley, for any closing remarks. Douglas Yearley: Drew, I thank you. Thanks everyone for your interest and support. I'm sorry, that we didn't get to every question, but next Wednesday, there will be plenty of opportunity, during our three-hour Analyst and Investor Day, for Q&A. We have built Q&A in throughout the day. And I'm really as I said excited to share next Wednesday with all of you. So proud of this company and just so proud of what we're going to be able to show you next week about how we operate. And most importantly, the people, within this company that do all the work. So hope, you can join us. And thanks again. Have a great balance of the week and weekend. And we'll see you next week. Thanks. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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.
