Toll Brothers, Inc. (TOL) is scheduled to report its third-quarter fiscal 2024 (ended July 31, 2024) earnings on August 20th, after the closing bell. Investors will be closely watching to see how the company navigates the current housing market, which is characterized by rising mortgage rates and an ongoing demand for new homes.
In the previous quarter, Toll Brothers’ earnings missed analyst estimates, but revenues exceeded expectations. This trend of fluctuating performance has been a consistent theme in recent quarters. The company’s earnings topped estimates in three out of the last four quarters, while falling short in the other.
Looking ahead to the third quarter, analysts are predicting a 12.1% decline in earnings per share from the same period last year, with revenue expected to rise slightly. The consensus estimate for earnings per share is $3.28, while revenue is projected at $2.7 billion.
Several factors will likely impact Toll Brothers’ performance in the third quarter. The company is expected to benefit from an increase in home deliveries, fueled by the demand for new homes in a market with limited existing inventory. Toll Brothers’ focus on luxury move-up buyers, who are less sensitive to price changes, could also contribute to revenue growth. The company has been successfully broadening its product lines, price points, and geographic reach, as well as increasing spec sales (homes built without a buyer in mind) which has also been a positive factor.
However, the company also faces challenges. Higher land, labor, and raw material costs, coupled with increased incentives, are expected to pressure margins. Toll Brothers predicts its adjusted home sales gross margin will decline to 27.7%, down from 29.3% in the same period last year. The company also anticipates an increase in SG&A expenses, projected at 9.2% of home sales revenues, compared to 8.6% in the prior year.
Despite these potential headwinds, Toll Brothers is optimistic about its future growth. The company expects home deliveries to increase to between 2,750 and 2,850 units in the third quarter, up from 2,524 units in the same period last year. However, the average home price is expected to decline from $1,059,100 to between $950,000 and $960,000.
The earnings release will provide valuable insight into Toll Brothers’ performance in the current housing market. Investors will be looking for updates on the company’s sales, deliveries, pricing, and margins, as well as its outlook for the remainder of the year.
