TOL Earnings Preview: An update from the homebuilders
2min read Toll Brothers (TOL) is set to release its Q4 earnings report on December 10, 2024, after market close, with the earnings call scheduled for the following morning. Analysts expect the luxury homebuilder to report EPS of $4.34, up from $4.11 a year ago, and revenue of $3.17 billion, reflecting a 5% year-over-year increase. The company is also anticipated to provide FY2025 guidance, with consensus estimates calling for EPS of $14.51 and revenue of $10.93 billion.
Key metrics to watch include home sales gross margin, which was guided at 27.5% for Q4, down from 28.8% in Q3, as well as Deliveries, which are expected to range from 3,275 to 3,375 units. Backlog units and average delivered price per unit will also be critical indicators, with analysts projecting backlog units at 5,944, down from 6,578 a year ago, and the average price at $944,000, a drop from $1.07 million last year. Analysts will closely monitor TOL's ability to sustain margins and volumes amidst industry-wide challenges.
Toll Brothers’ focus on luxury homes has helped shield it from the broader headwinds facing the housing market, such as high mortgage rates. Its affluent customer base, capable of larger down payments, has allowed the company to maintain stronger margins compared to peers. However, rising mortgage rates and buyer hesitancy due to anticipated rate cuts in 2025 remain challenges for the industry. Analysts will look for indications of whether Toll Brothers is offering significant incentives, such as mortgage buydowns, which have pressured margins for competitors.
A notable theme in the industry is the impact of high mortgage rates on demand and pricing power. Competitors like KB Home and Lennar have reported declines in gross margins due to incentives. Toll Brothers’ ability to differentiate itself through its luxury segment and maintain pricing strength will be a key focus for investors. The company’s execution in managing its backlog and capitalizing on its higher-margin customer base could set it apart in a challenging environment.
Toll Brothers’ stock has been on a strong run, reaching all-time highs in late November but pulling back 7.5% since then, reflecting some caution ahead of the earnings report. The stock's performance will depend on whether the company can meet or exceed its guidance and deliver confidence in its FY2025 outlook. Analysts have generally maintained optimistic ratings, with price targets averaging $161.57, indicating modest upside from current levels.
In summary, Toll Brothers’ Q4 report is expected to highlight its resilience in a high-rate environment, supported by a strong luxury market focus. Key areas of focus will include margins, delivery volumes, and management’s outlook for FY2025 amidst broader industry headwinds. With its stock consolidating ahead of the results, the earnings report will be pivotal in shaping sentiment and the trajectory for TOL shares in the near term.
