Toll Brothers (TOL) Q4 Earnings Top, Orders Rise, Stock Up
Toll Brothers, Inc.'s TOL shares gained 0.6% in the after-hour trading session, following its fourth-quarter fiscal 2019 earnings release, wherein earnings and revenues topped the respective Zacks Consensus Estimate. The company also remains optimistic about attaining higher deliveries in first-quarter fiscal 2020, courtesy of lower mortgage rates and a solid job market.
Earnings & Revenue Discussion
The country's leading luxury homebuilder reported earnings of $1.41 per share in the quarter under review, surpassing the Zacks Consensus Estimate of $1.29 by 9.3%. However, the said figure dropped 32.2% from the year-ago figure of $2.08 as a result of lower revenues and margins.
Consolidated revenues of $2.38 billion topped the consensus mark of $2.18 billion by 9.4%. The reported figure, however, decreased 3.1% year over year due to lower deliveries and average selling prices.
Toll Brothers Inc. Price, Consensus and EPS Surprise
Toll Brothers Inc. price-consensus-eps-surprise-chart | Toll Brothers Inc. Quote
Segment Detail
Toll Brothers operates under two reportable segments, namely Traditional Home Building and Urban Infill ("City Living").
Revenues from Traditional Home Building totaled $2.26 billion, down 5.4% year over year and that of City Living decreased 54.7% to $28.6 million during the quarter.
Inside the Headline Numbers
Consolidated homebuilding revenues decreased 6.6% year over year to $2.29 billion. Homebuilding deliveries during the quarter declined 1.4% year over year to 2,672 units. Deliveries decreased in all the regions served by the company, except South. Deliveries in Citi Living declined to 28 units from 47 units a year ago.
The average price of homes delivered was $857,800 in the quarter, down 5.3% from the year-ago level of $906,000.
Nonetheless, the number of net signed contracts or orders during the reported quarter was 2,031 units, up 18.4% year over year. The value of net signed contracts was $1.68 billion, reflecting 11.8% increase from the year-ago quarter.
At the end of fiscal 2019, Toll Brothers had a backlog of 6,266 homes, representing a 2.6% year-over-year increase. However, potential revenues from backlog declined 4.8% year over year to $5.26 billion owing to a 7.3% decline in average price of homes in backlog.
Cancellation rate during the reported quarter was 8.9%, reflecting a decline from 9.3% in the prior-year period.
Margins
The company's home sales adjusted gross margin was 21.9%, contracting 220 basis points (bps) in the quarter.
SG&A expenses — as a percentage of home sales revenues — were 9%, up 140 bps from the year-ago quarter. Operating margin of 9.5% was down 430 bps in the quarter.
Financials
Toll Brothers had $1.29 billion cash and cash equivalents as of Oct 31, 2019 compared with $1.18 billion at fiscal 2018-end.
During fiscal 2019, the company repurchased 6.6 million shares, at an average price of $35.28 per share, for a total purchase price of $233.5 million.
Fiscal 2019 Highlights
Earnings per share came in at $4.03 in the fiscal year, down 16.9% year over year. Nonetheless, consolidated revenues of $7.22 billion were up 1.1% from a year ago. Homebuilding revenues were down 0.9% year over year to $7.08 billion.
Net signed contracts of $6.71 billion and 8,075 units were down 12% in dollars and 5% in units compared with $7.60 billion and 8,519 units in fiscal 2018.
First-Quarter Fiscal 2020 Guidance
For the quarter, home deliveries are anticipated in the range of 1,650-1,850 units (indicating an increase from 1,530 units reported in the year-ago period) at an average price of $800,000-$820,000 (suggesting a decrease from the year-ago figure of $862,300).
Toll Brothers expects adjusted home sales gross margin of 21.3%, implying a decline from 24.2% recorded in the year-ago period. SG&A expenses, as a percentage of home sales revenues, for the quarter are projected at 13.5% (indicating an increase from 12.3% in the year-ago period).
Zacks Rank
Toll Brothers — which shares space with PulteGroup Inc. PHM, NVR, Inc. NVR and D.R. Horton, Inc. DHI in the Zacks Building Products - Home Builders industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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