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Toll Brothers (TOL) to Post Q2 Earnings: What's in Store?

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·5 min read
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Toll Brothers, Inc. TOL is scheduled to report second-quarter fiscal 2022 (ended Apr 30, 2022) results on May 24, after the closing bell.

In the last reported quarter, the company’s earnings and revenues surpassed the Zacks Consensus Estimate by 10.7% and 1.2%, respectively. The said metrics also increased 63.2% and 14.6%, respectively, from the prior year on the back of higher deliveries and prices.

On an encouraging note, earnings topped analysts’ expectations in 16 of the 17 trailing quarters.

Trend in Estimate Revision

The Zacks Consensus Estimate for fiscal second-quarter earnings has been revised downward over the past 60 days to $1.12 per share from $1.14. The said figure indicates a 44.6% rise from the year-ago earnings of $1.01 per share. The consensus mark for revenues is $2.05 billion, suggesting a 6.2% year-over-year rise.

Toll Brothers Inc. Price and EPS Surprise

Toll Brothers Inc. Price and EPS Surprise
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’ second-quarter revenues are expected to have increased from the year-ago level, buoyed by a highly motivated buyer and lack of available supply.

Home sales of this luxury homebuilding company are expected to have increased in the fiscal second quarter from the year-ago level, given higher deliveries and prices.

Also, its focus on luxury move-up buyers — who already possess a residence and are looking for a 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 the product lines, price points and geographies.

During the fiscal first-quarter earnings call, TOL highlighted that it expects to record home deliveries of 2,350 units (indicating a rise from 2,271 units delivered in the prior-year period) at an average selling price or ASP of $865,000-$885,000 (suggesting a rise from $808,600 a year ago).

Toll Brothers expects adjusted home sales gross margin to be 25.5%, implying a rise from 21.9% recorded in the year-ago period. SG&A expenses, are estimated to be 11.9% of home sales revenues, indicating no change from the year-ago period. Also, the company expects the effective tax rate to be 26%.

Meanwhile, higher land, labor and raw material costs are expected to have put pressure on fiscal second-quarter margins. Sustained supply-chain disruptions in the industry are expected to have reflected in the company’s performance.

Estimates

The Zacks Consensus Estimate for backlog is pegged at 11,869 units, indicating growth of 17.5% year over year. The same for the average price of the backlog is pegged at $959,000, implying a rise from the year-ago figure of $860,000. The consensus estimate for net signed contracts is pegged at 2,920 units. This indicates a marginal decline from the prior-year figure of 3,487 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 0.00%. 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 #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Recent Construction Releases

D.R. Horton, Inc.’s DHI second-quarter fiscal 2022 earnings and revenues not only beat the respective Zacks Consensus Estimate but also improved on a year-over-year basis.

DHI increased its revenue guidance for the full year, depicting DHI’s industry-leading market share, broad geographic footprint and diverse product offerings across multiple brands.

United Rentals, Inc. URI reported better-than-expected first-quarter 2022 results. Better fleet productivity on broad-based rental demand in construction and industrial verticals, higher total and rental revenues along with stronger pricing helped the company start 2022 on a stronger note.

URI also lifted its full-year guidance for total revenues, adjusted EBITDA and free cash flow, given customer sentiments and solid project activity.

UFP Industries, Inc.’s UFPI first-quarter 2022 earnings and net sales beat the Zacks Consensus Estimate as well as improved impressively on a year-over-year basis.

With this, UFPI’s earnings and sales surpassed the consensus mark in all the trailing five quarters. The uptrend was mainly driven by the diversity of markets and an improved pricing model.


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