Toll Brothers’ Q3 Results Top Estimates; Shares Rise 1.9%

Shares of luxury homes builder Toll Brothers, Inc. (TOL) gained 1.9% in extended trade on Tuesday to close at $61.04 as the company reported better-than-expected results for the third quarter ended July 31, 2021.

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Quarterly revenues jumped 36.6% year-over-year to $2.26 billion, topping the Street’s estimates of $2.23 billion. This growth can be attributed to a 37.3% year-over-year rise in revenues from Home sales, which made almost 99.1% of the total revenues.

The company has reported quarterly earnings of $1.87 per share, up significantly from $0.90 per share a year ago. Analysts had estimated the company to post earnings of $1.54 per share in the third quarter.

Notably, the company anticipates to deliver 3,450 units in the fourth quarter and 10,100 units for fiscal 2021. The average delivered price per home is estimated to be $840,000 and $830,000 for the fourth quarter and full-year 2021, respectively.

The CEO of Toll Brothers, Douglas C. Yearley, Jr., said, “Demand continues to be very strong. Net signed contracts were up 35% in dollars to approximately $3 billion compared to the prior-year period. The housing market is being driven by many strong fundamentals, including low mortgage rates, favorable millennial-driven demographics, a decade of pent-up demand, low new home supply, and a tight resale market. We expect strong and sustainable demand for our homes in the years to come.” (See Toll Brothers stock chart on TipRanks)

Two months ago, Goldman Sachs analyst Susan Maklari reiterated a Sell rating on the stock. The analyst, however, lowered the price target to $55 from $59, which implies 9.9% downside potential from current levels.

According to Maklari, the homebuilding industry faces headwinds from seasonality and more challenging comparisons. As a result, the analyst believes that the homebuilder stocks will remain range-bound.

Consensus among analysts is a Hold based on 3 Buys, 2 Holds and 3 Sells. The average Toll Brothers price target of $70.71 implies upside potential of 15.8% from current levels. Shares have gained 32.6% over the past year.