Toll Brothers (NYSE:TOL) posted third-quarter earnings and revenue that exceeded Wall Street expectations on Tuesday, though new orders lagged projections and the company trimmed its full-year closings forecast.
Shares of the upscale homebuilder fell 2% in premarket trading as of 04:52 ET (08:52 GMT).
The company reported earnings of $3.73 per share for the quarter ending July 31, surpassing the average analyst estimate of $3.60. Revenue reached $2.88 billion, slightly above the anticipated $2.86 billion.
The firm highlighted ongoing “affordability pressures and uncertain economic conditions.”
Net signed contract value remained steady at $2.41 billion, while the number of new contracts dropped 4%. Net orders totaled 2,388, below the consensus estimate of 2,544 and down 10% from the prior quarter.
“In this environment, we continue to focus on strategically balancing price and pace in order to maximize profitability and returns,” said CEO Douglas Yearley. “We are actively managing our spec starts on a community-by-community basis to best match local demand.”
During the quarter, Toll Brothers delivered 2,959 homes, a 5% increase from the prior year. However, gross margin on home sales narrowed to 25.6% from 27.4% a year ago.
Looking ahead, the company anticipates 3,350 home closings, an average selling price around $975,000, and an adjusted gross margin of 27%. For the full year, it now expects 11,200 closings, down from the previous guidance range of 11,200 to 11,600. Adjusted gross margin guidance remains at 27.25%, while the average selling price is projected between $950,000 and $960,000, compared with the prior range of $945,000 to $965,000.
While Toll Brothers delivered a solid Q3 showing, Oppenheimer analysts noted, “orders were below Street estimates and FY25 closings guidance was reduced. This likely reinforces bear concerns that TOL faces challenges sustaining volume next year. For now, a still healthy gross margin along with our expectation for community count and ASP growth next year remain positives to keep in mind.”
Separately, Evercore ISI commented that it expects management to address current demand trends and incentive levels on today’s call, as well as provide an outlook for a rebound in absorptions and discuss plans for capital allocation.
Toll Brothers also repurchased roughly 1.8 million shares during the quarter, spending $201 million.
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