Moody’s upgrades Agnico Eagle’s rating to A3 on debt reduction
On Thursday, RBC Capital Markets adjusted its outlook on Toll Brothers (NYSE:TOL), a luxury homebuilding company, by reducing the price target from $142.00 to $139.00 while maintaining an Outperform rating. The revision follows Toll Brothers’ guidance for the first and second quarters, which was perceived with some skepticism due to mixed current demand signals and second-quarter order expectations that fell short of both RBC Capital’s and Wall Street’s estimates. According to InvestingPro data, the stock currently trades at an attractive 7.6x earnings multiple, significantly below industry averages, suggesting potential value despite recent market concerns.
In a statement, RBC Capital analysts noted a slight decrease in their forecast for Toll Brothers’ earnings per share (EPS) for fiscal years 2025 and 2026, citing a modest impact from a softer first half performance. However, they expect a significant portion of other and joint venture income to be realized in the second half of the year. Management’s unchanged full-year guidance was questioned in light of the uncertain demand environment and conservative second-quarter order outlook. InvestingPro analysis reveals the company maintains strong profitability with a 28.1% gross margin and impressive 20% return on equity, suggesting resilience in its business model. The company’s financial health score of "GREAT" on InvestingPro indicates robust operational fundamentals.
Despite these concerns, RBC Capital highlighted Toll Brothers’ strong gross margin percentage, which reflects the company’s robust land position and affluent customer base. Analysts believe that these factors should continue to support a healthy return on equity and capital return for the homebuilder. The recent pullback in Toll Brothers’ stock price, which has declined 13.7% over the past six months according to InvestingPro, was seen as an attractive entry point for investors, but the firm acknowledged that macroeconomic challenges in the housing market remain a near-term hurdle. Toll Brothers was recognized as being relatively better positioned to navigate these challenges compared to its peers, though not entirely immune to market conditions. The company’s strong financial position is evidenced by its current ratio of 4.57, indicating ample liquidity to meet short-term obligations.
The firm’s analysis suggests that Toll Brothers’ differentiated approach and strong customer base are key advantages that could help the company maintain its performance amidst broader industry headwinds. RBC Capital’s updated price target reflects a balance between the near-term market challenges and the company’s longer-term prospects.
In other recent news, Toll Brothers Inc. reported its first-quarter 2025 earnings, missing analyst forecasts for both earnings per share (EPS) and revenue. The company posted an EPS of $1.75, falling short of the expected $2.04, while revenue came in at $1.84 billion, below the anticipated $1.91 billion. Despite the earnings miss, Toll Brothers maintained its full-year guidance, projecting home deliveries between 8,600 and 11,400 and an adjusted gross margin of 27.25%. The company also plans $500 million in share repurchases for the year. Analysts from Evercore ISI and UBS noted the company’s strategic focus on managing inventory and spec homes, which account for a significant portion of sales. CEO Douglas Yearly emphasized the company’s strategy of balancing pricing and pace, while CFO Marty Connor highlighted the financial strength of Toll Brothers’ buyers, with 26% paying all cash. The company reported a 13% increase in net contracts, totaling $2.3 billion, indicating potential future growth.
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