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On Friday, Keefe, Bruyette & Woods made an adjustment to their financial outlook for Toll Brothers , a company listed on the New York Stock Exchange under the ticker (NYSE:TOL). The firm’s analyst, Jade Rahmani, revised the price target downwards from $132.00 to $120.00 but chose to maintain a Market Perform rating on the stock.
The adjustment was made following the company’s fiscal second-quarter results, which, while 26% higher than Keefe, Bruyette & Woods’ projections in terms of deliveries, other income, SG&A, and gross margin, also showed orders falling short by 13% compared to the expected 7% increase. The management’s description of the housing market trends as "soft" was also a contributing factor to the revised forecast.
Rahmani noted that the stock currently trades at 1.3 times its current book value and 1.1 times its forward book value. With a P/E ratio of 7.66 and strong liquidity indicated by a current ratio of 4.1, the stock trades at attractive multiples. This valuation is approximately 15% below that of its large-cap peers. Despite the stock appearing attractive in terms of long-term valuation and the company’s strong positioning against entry-level builders, the prevailing uncertain market conditions have led the analyst to maintain the Market Perform rating.
The reduction in the forward 2025-2026 estimates by 4.5% is attributed to expectations of lower deliveries, other income, and margins. Toll Brothers’ performance, especially in the context of the housing market’s current state, seems to have a significant influence on the firm’s cautious stance.
In summary, while Toll Brothers’ recent financial results have surpassed expectations in several key areas, the overall market’s unpredictability and the lower-than-anticipated order numbers have influenced Keefe, Bruyette & Woods’ decision to lower the price target while keeping the rating unchanged.
In other recent news, Toll Brothers Inc. reported impressive financial results for the second quarter of fiscal 2025, surpassing earnings expectations with an earnings per share (EPS) of $3.50, compared to the forecasted $2.84. The company also reported revenue of $2.74 billion, exceeding the anticipated $2.5 billion. Following these results, Evercore ISI raised its price target for Toll Brothers to $169.00, maintaining an Outperform rating, citing the company’s robust performance. RBC Capital also maintained an Outperform rating with a price target of $133.00, highlighting Toll Brothers’ strategic market positioning and strong land portfolio.
The company delivered 2,899 homes at an average price of $934,000, achieving record home sales revenue of $2.71 billion. Despite a softer demand environment, Toll Brothers maintained low cancellation rates and a significant portion of cash buyers. The company reaffirmed its full-year guidance, projecting home sales revenue of $10.9 billion and earnings of approximately $14 per share. Analysts from RBC Capital and Evercore ISI expressed confidence in Toll Brothers’ ability to navigate current market conditions, with Evercore adjusting its full-year 2025 EPS forecast to $14.51.
Toll Brothers’ strategic focus remains on pricing over sales volume, aligning with Evercore ISI’s "Less is More" thesis for the homebuilding industry. The company’s share repurchase activity exceeded expectations, reflecting confidence in its financial strategy. Additionally, Toll Brothers reported a strong backlog and anticipated higher average home prices in 2026, despite challenges such as economic uncertainty and regional market variations.
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