Toll Brothers 2025 Q2 Earnings Revenue Dips as Net Income Falls 26.8%

Toll Brothers (TOL) reported its fiscal 2025 Q2 earnings on May 29th, 2025. For the quarter, the company's revenue decreased by 3.5% compared to the previous year, and its earnings per share (EPS) and net income also declined, reflecting a challenging environment. Despite these results, the company maintained its full-year guidance, signaling confidence in its strategic direction and long-term market positioning.

Revenue

Toll Brothers experienced a 3.5% decline in total revenue, amounting to $2.74 billion for Q2 2025, compared to $2.84 billion in Q2 2024. The home sales segment contributed $2.71 billion, while land sales and other revenues added $32.62 million, underscoring the slight dip in overall revenue performance.

Earnings/Net Income

Toll Brothers saw its earnings per share (EPS) decline by 23.3% to $3.53 in Q2 2025, down from $4.60 in Q2 2024. Net income dropped 26.8% to $352.45 million, compared to $481.62 million in the previous year. The EPS reflects weaker performance in the current quarter.

Post-Earnings Price Action Review

The strategy of purchasing Toll Brothers stock when revenues exceed expectations and holding for a 30-day period has historically yielded strong returns, achieving a cumulative 202.09% gain and outperforming the benchmark. However, this approach carries a substantial risk, evidenced by a maximum drawdown of -47.04% and a Sharpe ratio of 0.63, indicating moderate risk-adjusted returns. Investors should consider these factors when evaluating potential investments in Toll Brothers stock, as the strategy implies significant volatility and risk, despite the attractive returns. Such investments require careful risk management and an understanding of market conditions that may affect the company's performance.

CEO Commentary

Douglas C. Yearley, Jr., Chief Executive Officer, expressed satisfaction with the Q2 results, highlighting that earnings exceeded expectations. He emphasized strong demand for luxury homes and the company's strategic focus on price and margin. Yearley remains optimistic about the long-term outlook due to housing shortages and favorable demographics, asserting the company's readiness to adapt to market changes and deliver value to shareholders.

Guidance

For Q3, Toll Brothers expects deliveries between 2,800 and 3,000 units, with an average home price between $965,000 and $985,000. The company maintains its adjusted home sales gross margin guidance at 27.25% and anticipates SG&A expenses to be approximately 9.2% of home sales revenue. For the full fiscal year, Toll Brothers reaffirms its delivery guidance of 11,200 to 11,600 homes, with an average price of $945,000 to $965,000 and a gross margin of 27.25%.

Additional News

In recent weeks, Toll Brothers announced several new luxury community developments, reflecting its ongoing expansion strategy. The company unveiled a new upscale residential community in Royersford, Pennsylvania, and announced the final opportunity to purchase homes at Ranch Gate Estates in Scottsdale, Arizona. Additionally, Toll Brothers has increased its share repurchase program for fiscal 2025 from $500 million to $600 million, demonstrating confidence in its financial health and commitment to returning value to shareholders. This strategic expansion and financial maneuvering underline Toll Brothers' efforts to strengthen its presence in the luxury housing market amidst challenging economic conditions.