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Toll Brothers stock rises after the home builder tops earnings estimates

Yahoo Finance Live anchors discuss fourth-quarter earnings for Toll Brothers.

Video Transcript

[AUDIO LOGO]

BRIAN SOZZI: Well, all right, shares of Toll Brothers are on the move following a quarterly earnings beat. But the CEO did warn about the impact from the ongoing housing market slowdown.

A couple of numbers that jumped out to me here, guys. Net-signed contracts were down 60% in units and 56% in this most recent quarter. Longtime CEO Douglas Yearley noting that the dramatic increase in mortgage rates since March presents a challenging market as we enter next year. Well, yes, it does.

BRAD SMITH: Yeah, absolutely. And a few of the calculations that I was actually running for Toll Brothers-- even if the pricing is higher year-over-year, you're still looking at an environment for them that has started to pull back because of the net-signed contract value actually down by about 21% here. Contracted homes actually down 34%. That number coming in at 8,255.

And particularly, one of the calculations that I was running was just to see how much people were paying on average for a Toll Brothers' home. And on that $3.6 billion figure that they had mentioned with about 3,700 homes that they sold through, $956,000 was the average selling price for a Toll Brothers' home in this most recent quarter.

And so you think about the environment for financing right now, that's gonna continue to be a headwind. And then additionally, how much they're gonna have to continue to spend just to find property, to find real estate that they can build on top of. I don't know, maybe they reach out to a Carvana since they're sitting on some lots there.

JULIE HYMAN: I mean, we've had so many companies come out and say that the outlook for 2023 is uncertain. So some of the analysts said that the fact that Toll Brothers even came out with an outlook, even released an outlook for 2023 is more positive, right? And the outlook is adjusted gross margin of 27% earnings-per-share of $8.00 to $9.00 in its full year 2023. So it seems like analysts were fairly positive on that outlook. You're looking--

BRIAN SOZZI: No, no, I--

JULIE HYMAN: --physically.

BRIAN SOZZI: No, what is interesting because we see this Toll Brothers quarter not good. Lowe's out this morning, a new $15 billion stock buyback plan. Also saying that demand is pretty stable so far in the fourth quarter. Real, I guess, difference between homeowners doing it yourself, fixing up or sprucing up your home than I guess the new home buyers.

JULIE HYMAN: Well, and on that front, by the way, we're gonna talk to the Ferguson CEO a little bit later in the show, which is a maker and retailer of home-related products. So they just release their earnings a couple of days ago so that should be interesting, too, to give us a fuller picture of what's going on in the industry.

BRAD SMITH: Absolutely.