Street Calls of the Week
Investing.com -- Toll Brothers reported third-quarter earnings and revenue ahead of Wall Street expectations on Tuesday, though orders missed estimates and the company reduced its annual closings guidance.
Shares in the luxury homebuilder were down 2% in premarket trading as of 04:52 ET (08:52 GMT).
Toll Brothers earned $3.73 per share for the quarter ended July 31, above analysts’ average estimate of $3.60.
Revenue was $2.88 billion, also ahead of the $2.86 billion expected.
The company flagged “affordability pressures and uncertain economic conditions.”
Net signed contract value was unchanged at $2.41 billion, while the number of new contracts declined 4%.
Net orders came in at 2,388, below the consensus estimate of 2,544, and down 10% from the previous quarter.
“In this environment, we continue to focus on strategically balancing price and pace in order to maximize profitability and returns,” said CEO Douglas Yearley.
“We are actively managing our spec starts on a community-by-community basis to best match local demand”
The company delivered 2,959 homes in the quarter, up 5% year-over-year.
Gross margin on home sales narrowed to 25.6% from 27.4% a year earlier.
Looking ahead, Toll Brothers expects 3,350 home closings, an average selling price of about $975,000, and an adjusted gross margin of 27%.
For the full year, the company forecasts 11,200 closings, down from the previous range of 11,200 to 11,600.
The adjusted gross margin of 27.25% guidance was unchanged. Average selling price is now expected between $950,000 and $960,000, compared with the previous range of $945,000 to $965,000.
While Toll Brothers delivered a strong Q3 performance, "orders were below Street estimates and FY25 closings guidance was reduced," Oppenheimer analysts said in a note.
"This likely reinforces bear concerns that TOL faces challenges sustaining volume next year. For now, a still healthy gross margin along with our expectation for community count and ASP growth next year remain positives to keep in mind."
Separately, Evercore ISI said it expects management to address current demand trends and incentive levels on today’s call, as well as provide an outlook for a rebound in absorptions and discuss plans for capital allocation.
Toll Brothers (NYSE:TOL) said it repurchased roughly 1.8 million shares during the quarter for $201 million.
(Pratyush Thakur contributed to this article.)