Toll Brothers, Inc. TOL is scheduled to report fourth-quarter fiscal 2022 (ended Oct 31, 2022) results on Dec 6, after the closing bell.
In the last-reported quarter, the company’s earnings and revenues surpassed the Zacks Consensus Estimate by 2.2% and 0.4%, respectively. The said metrics also increased 25.7% and 10.6%, respectively, from the prior year on the back of higher pricing.
On an encouraging note, earnings topped analysts’ expectations in 18 of the 19 trailing quarters.
Trend in Estimate Revision
The Zacks Consensus Estimate for fiscal fourth-quarter earnings has decreased to $3.88 per share from $3.93 over the past 30 days. The said figure indicates a 28.5% rise from the year-ago earnings of $3.02 per share. The consensus mark for revenues is pegged at $3.22 billion, suggesting a 5.7% year-over-year rise.
Toll Brothers Inc. Price and EPS Surprise
Toll Brothers Inc. price-eps-surprise | Toll Brothers Inc. Quote
Factors to Note
Despite unprecedented supply-chain issues and increased inflation, Toll Brothers’ fourth-quarter revenues are expected to have increased from the year-ago level, buoyed by a lack of available supply. Home sales of this luxury homebuilding company are expected to have increased in the fiscal fourth quarter from the year-ago level, given higher pricing.
Also, its focus on luxury move-up buyers — who already possess a residence and are looking to shift to larger and better homes — has been commendable. Toll Brothers has been enjoying greater pricing power than other homebuilding companies as these homebuyers are less sensitive to price changes. The company has been benefiting from the strategy of broadening its product lines, price points and geographies.
During the fiscal third-quarter earnings call, TOL highlighted that it expects home deliveries of 3,250-3,550 units (indicating a rise at the mid-point from 3,341 units delivered in the prior-year quarter) at an average selling price or ASP of $935,000-$955,000 (suggesting a rise from $883,100 a year ago).
Toll Brothers expects the adjusted home sales gross margin to be 29.2%, implying a rise from 25.9% recorded in the year-ago period. SG&A expenses are estimated to be 8.7% of home sales revenues, indicating a decline from 8.8% in the year-ago period. Also, the company expects the effective tax rate to be 24.8%.
Meanwhile, higher land, labor and raw material costs are expected to have put pressure on fiscal fourth-quarter margins. Continued supply-chain disruptions in the industry are expected to have reflected in the company’s performance.
The Zacks Consensus Estimate for the backlog is pegged at 8,768 units, indicating a decline from $10,302 million a year ago. The same for the average price of the backlog is pegged at $1,052,000, implying a rise from the year-ago figure of $922,000. The consensus estimate for net signed contracts is pegged at 1.463 units. This indicates a decline from the prior-year figure of 2,957 units.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict an earnings beat for Toll Brothers this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -7.95%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.
Recent Construction Releases
D.R. Horton, Inc.’s DHI fourth-quarter fiscal 2022 earnings and revenues missed the respective Zacks Consensus Estimate.
Nonetheless, D.R. Horton’s fiscal 2022 results were highlighted by 42% improvement in pre-tax income, 350 basis point expansion in pre-tax profit margin and 21% increase in revenues. These results reflect production capabilities, industry-leading market share, broad geographic footprint and diverse product offerings across multiple brands.
United Rentals, Inc. URI reported third-quarter 2022 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. The company has been gaining from the sustained demand in its end markets and the strength of its core rental business.
URI also lifted its full-year guidance for total revenues and adjusted EBITDA, given broad-based end-market activity, contractor backlogs, customer sentiment and solid visibility.
Jacobs Engineering Group Inc. J reported fourth-quarter fiscal 2022 (ended Sep 30, 2022) results, with earnings and revenues surpassing their respective Zacks Consensus Estimate and rising year over year.
For fiscal 2022, Jacobs’ total revenues of $14.92 billion grew 5.9% year over year and 10% at constant currency. Adjusted EPS was $6.93, an increase of 10% from fiscal 2022 and 13% at constant currency. Adjusted EBITDA grew 10% to $1.4 billion and 12% at constant currency.
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