Toll Brothers reported better-than-expected 3Q results as record-low interests rates led to a surge in demand for housing. Shares of the luxury residential home builder are advancing 2.5% in the pre-market session.
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On Aug. 25, Toll Brothers (TOL) reported 3Q revenues of $1.65 billion surpassing analysts’ expectations of $1.55 billion. Its earnings of $0.90 per share also beat Street estimates of $0.71. During the quarter, the number of purchase contracts jumped 26% to 2,833 year-over-year while total contract value climbed 18%.
Toll Brothers’ CEO Douglas C. Yearley, Jr. said, “Our third quarter net signed contracts were our highest third quarter ever in both units and dollars, and our contracts per community, at 8.5, were the highest third quarter in fifteen years.” He further stated that “We attribute the surge in demand to a number of factors, including historically low interest rates, a continued undersupply of homes, and consumers focused more than ever on the importance of home.” (See TOL stock analysis on TipRanks).
On Aug. 6, Wedbush analyst Jay McCanless lifted the stock’s price target to $45 (2.3% downside potential) from $39 and reiterated a Buy rating, citing better demand and pricing environment for the housing market. McCanless also raised his EPS estimates on Toll Brothers stating his previous forecasts were too conservative.
Currently, the Street is sidelined on the stock. The Hold analyst consensus is based on 4 Holds, 4 Buys, and 3 Sells. With shares up nearly 16.6% year-to-date, the average price target of $37.14 implies downside potential of about 19.4% to current levels.
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