Toll Brothers Inc. TOL announced the acquisition of Sharp Residential, one of the largest private home building companies in Atlanta, in a bid to expand its presence in Atlanta, GA market. However, the terms of the deal have been kept under wraps.
Founded in 1991, Sharp Residential has delivered more than 5,000 homes in the Atlanta market since its inception, primarily focusing on the northern suburbs with homes ranging from first-time to luxury. On the date of the acquisition, Sharp Residential had nearly $65 million of backlog, consisting of 125 homes, with an average price of $520,000.
The nation’s leading luxury homebuilding company acquired roughly 900 lots owned and controlled in the Atlanta MSA. This buyout is likely to boost its community count by nearly 10 communities as of the closing date.
The company generally faces limited competition as it mostly caters to luxury move-up buyers who already possess a residence, and are looking for a shift to larger and better homes. These homebuyers are less sensitive to price changes. The diversity of Sharp Residential’s product lines, great land positions, reputation for fine quality homes and long-established local relationships will place Toll Brothers suitably to meet the growing demand, thereby giving it a competitive edge over peers.
Shares of the company have gained 13.9% year to date, comparing unfavorably with its industry's 30.9% rally. Softness in homebuying demand, owing to affordability challenges and general market uncertainty, is hurting bottom-line performance. Also, rising material and labor costs are growing concerns for the company’s margin.
Nonetheless, management believes that Toll Brothers remains well positioned to benefit from robust economy, improving demographics and financial health of its affluent customer base.
Zacks Rank & Stocks to Consider
Currently, Toll Brothers carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the same space are NVR, Inc. NVR, PulteGroup, Inc. PHM and Taylor Morrison Home Corporation TMHC, each sporting a Zacks Rank #1.
NVR, PulteGroup and Taylor Morrison surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average being 17.6%, 13.5% and 38.7%, respectively.
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NVR, Inc. (NVR) : Free Stock Analysis Report
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