Anticipated Performance Overview
On Aug 22, after market close, Toll Brothers, Inc. TOL is set to unveil its third-quarter fiscal 2023 results, covering up to July 31, 2023.
Historical Performance
In the previous quarter, the company’s earnings and revenues exceeded forecasts with an impressive margin: earnings by 50.8% and revenues by 21.3%. This represented a 54.1% surge in earnings and a 10.1% rise in revenues from the same quarter the previous year. Moreover, in the last 22 quarters, earnings surpassed predictions 21 times.
Estimates for the Coming Quarter
Over the past two months, there’s been no revision in the earnings per share (EPS) estimate, which remains steady at $2.86. This signifies a 21.7% growth from the EPS reported in the same quarter last year. Projected revenues stand at $2.47 billion, hinting at a 1% drop year-over-year.
Key Factors to Watch
Despite the promise of higher pricing, Toll Brothers may report a dip in home sales for this quarter, attributed to industry-wide challenges like softer demand. Contributing factors include the rise in mortgage rates since March 2022 and volatile macroeconomic conditions.
However, the scarcity of pre-existing homes on the market has boosted the demand for newly built homes. This shift could potentially elevate the company’s revenues for this quarter, though rising mortgage rates pose challenges.
What’s more, the company’s emphasis on luxury move-up buyers might further bolster revenues. These buyers, who already own homes, are seeking larger and more luxurious properties. Thanks to this market segment, Toll Brothers could exercise more pricing flexibility compared to competitors, as these buyers tend to be less price-sensitive. Their broadening strategies in product range, price points, and geographies also add to the firm’s strengths.
Financial Projections
For this quarter, TOL anticipates delivering between 2,350 to 2,450 units at an average price ranging from $1,005,000 to $1,025,000. This forecast suggests a revenue increase of 7.7% year-over-year, amounting to $2.43 billion.
On the downside, supply chain issues, inflation, and rising costs for land, labor, and materials might strain the quarter’s margins. Nonetheless, the company’s efforts in cost management might counterbalance these pressures.
The projected adjusted home sales gross margin stands at 27.7%, up from the 26% from the year-ago quarter. The SG&A expenses might make up 9.7% of home sales revenues, a reduction from the 10.3% last year.
Additional Estimates
Our projections indicate a backlog of 7,218 units, a decrease from 10,725 homes last year. The backlog’s value might reach $8.2 billion, down from $11.7 billion in the third quarter of fiscal 2022. Net signed contracts might hover around 2,049 units, marking an improvement from the 1,266 units last year.
What to Expect This Week
Given the anticipation surrounding Toll Brothers’ earnings report, investors can expect a more active trading week. Market participants will be closely watching for any indicators that might hint at the company’s future performance and potential adjustments in their investment strategies.
The company’s past successes and the current trends in the housing market set a hopeful stage, but it remains essential to monitor the actual results and analyze them in context.
