TOL shares slide but luxury housing market remains in great shape
2min read Toll Brothers (TOL) delivered robust Q4 results, exceeding analyst expectations on both earnings and revenue. The company reported EPS of $4.63, beating the consensus estimate of $4.34, and revenue of $3.33 billion, surpassing the forecasted $3.17 billion. These figures represented year-over-year growth of 12.6% in EPS and 10.4% in revenue, capping what CEO Douglas Yearley described as the company’s “strongest year ever.”
Key performance indicators (KPIs) highlighted strong operational execution. The company delivered 3,431 homes during the quarter, a 25% year-over-year increase, surpassing the estimate of 3,343 units. Net signed contracts rose sharply, up 30% year-over-year to 2,658 units, exceeding the forecast of 2,508 units. The average delivered price per unit came in at $950,200, slightly above expectations of $944,000.
Despite the strong quarterly results, the company’s backlog reflected a cooling demand environment. Backlog value fell 6.9% year-over-year to $6.47 billion, and the number of homes in backlog dropped by 9% to 5,996 units, although both metrics exceeded analyst estimates. Toll Brothers attributed the decline to tough comparisons from the prior year but emphasized the strength of current orders.
Guidance for fiscal 2025 was cautiously optimistic. The company projected full-year deliveries of 11,200-11,600 homes at an average price of $945,000 to $965,000. Adjusted home sales gross margin for fiscal 2025 was guided at 27.3%, slightly below the previous year’s 27.9% but in line with expectations. For Q1, deliveries were forecasted at 1,900-2,100 units, reflecting typical seasonal trends.
The broader housing market presented mixed dynamics. Toll Brothers’ focus on luxury homes insulated it somewhat from higher mortgage rates, as its affluent customer base is less sensitive to financing costs. However, rising rates and a backlog decline suggest some challenges ahead, particularly in sustaining order momentum. The company’s gross margin of 27.9% remained healthy, albeit lower than the 29.1% achieved a year ago.
Toll Brothers continued its commitment to shareholder returns, repurchasing 1.3 million shares during the quarter at an average price of $150.19, totaling $200.9 million. The company ended the fiscal year with $1.3 billion in cash and an improved net debt-to-capital ratio of 15.2%, down from 17.7% the prior year, reflecting strong financial management.
The stock reacted modestly to the results, declining 1.75% in after-hours trading. This muted response likely reflects concerns over backlog declines and the slightly softer guidance on gross margins, despite the otherwise strong quarterly performance. Shares have gained approximately 50% year-to-date, outperforming the broader market, but investor sentiment may now hinge on the sustainability of order growth and margin resilience.
Toll Brothers benefits from its positioning in the luxury home market, which remains less affected by affordability constraints plaguing other segments. However, the company faces headwinds from macroeconomic uncertainty, including elevated mortgage rates and cautious consumer behavior. These factors could weigh on backlog growth and future pricing power.
In summary, Toll Brothers delivered a strong close to fiscal 2024, with record results in revenue and deliveries. The company’s solid financial position, luxury market focus, and ongoing share buybacks provide a strong foundation, but challenges in sustaining backlog and managing margins will be key areas of focus for investors heading into fiscal 2025.
