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It has been about a month since the last earnings report for Toll Brothers (TOL). Shares have lost about 14.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Toll Brothers due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Toll Brothers Q4 Earnings & Revenues Beat With Strong Contract Growth
Toll Brothers reported fourth-quarter fiscal 2024 (ended Oct. 31) results, with earnings and revenues surpassing the Zacks Consensus Estimate and increasing on a year-over-year basis, respectively.
Notably, quarterly adjusted gross margins exceeded guidance, highlighting the strength of the Toll Brothers brand, the financial stability of its customer base and the success of its strategic initiatives, including increasing speculative home production and diversifying its geographic reach, price points, and product lines.
Toll Brothers is off to a promising start in fiscal 2025, with strong demand recorded in the first six weeks — a positive indicator as the critical spring selling season approaches. The company’s expansive footprint across more than 60 markets in 24 states, coupled with its diverse portfolio of luxury homes tailored to affluent buyers, positions it uniquely for success.
With ownership or control of approximately 74,700 lots at the close of fiscal 2024, Toll Brothers is equipped for sustained growth not only in fiscal 2025 but also into fiscal 2026 and beyond. The solid performance in the fiscal fourth quarter reflects the company’s resilience and adaptability in a dynamic housing market, setting the stage for a robust fiscal 2025.
TOL’s Quarterly Earnings & Revenue Discussion
The company reported adjusted earnings per share (EPS) of $4.63, which topped the consensus estimate of $4.30 by 7.7% and grew 12.7% from the year-ago period.
Total revenues (including Home sales and Land sales and others) of $3.33 billion beat the consensus mark of $3.17 billion by 5.3% and increased 10.4% year over year. Growth was attributable to higher deliveries.
Inside Toll Brothers’ Q4 Results
The company’s total home sales revenues grew 10% (well above our projection of growth of 6.1% year over year) from the prior year quarter to $3.26 billion. Homes delivered were up 25% (ahead of our expectation of 20.5% growth year over year) from the year-ago quarter to 3,431 units. The average price of homes delivered was $950,200 for the quarter, down from the year-ago level of $1,071,500. We had expected ASP to be down 12% year over year to $943,100.
Net-signed contracts for the quarter were 2,658 units, up 30% year over year. The value of net signed contracts was $2.66 billion, reflecting a rise of 32% year over year.
At the fiscal fourth-quarter end, Toll Brothers had a backlog of 5,996 homes, representing a year-over-year decrease of 9%. Potential revenues from backlog declined 7% year over year to $6.47 billion. The average price of homes in the backlog was $1,078,700 compared with $1,055,800 a year ago.
The cancelation rate (as a percentage of signed contracts) for the reported quarter was 5.9% compared with 10.8% in the prior-year period.
The company’s adjusted home sales gross margin was 27.9%, contracted 120 basis points (bps) for the quarter. SG&A expenses, as a percentage of home sales revenues, were 8.3%, which increased 10 bps from the year-ago quarter.