Toll Brothers Q3 EPS seen down 22% as housing demand softens

Toll Brothers reports Q3 earnings Aug. 18 with consensus EPS of $2.93, down 22% from $3.73 a year ago.

The Fort Washington, Pennsylvania-based luxury homebuilder guided home deliveries between 2,600 and 2,700 units for the quarter, down from 2,959 units delivered a year earlier. Average selling prices are expected to range from $965,000 to $985,000, compared with $973,600 in the year-ago period, according to company guidance.

Revenue consensus stands at $2.62 billion, down from $2.95 billion in Q3 fiscal 2025. Adjusted home sales gross margin is guided at 25.25 percent, a 225-basis-point contraction year over year, while SG&A expenses are expected at about 10 percent of home sales revenue, up 120 basis points. Backlog is estimated at 5,257 units, down 4.3 percent year over year, with potential revenues of $6.24 billion.

In the last reported quarter, Toll Brothers beat the Zacks Consensus Estimate by 5.4 percent on EPS and 5.1 percent on revenue, though both metrics declined 22.3 percent and 7.6 percent year over year, respectively.

The report will test whether Toll Brothers' luxury focus shields it from the broader housing slowdown. The 30-year fixed mortgage rate climbed from 6.37 percent in early May to 6.66 percent by late July, according to Freddie Mac data, pressuring affordability across the sector. Demand softness in the South, Mountain and Pacific regions is expected to have weighed on deliveries.

Toll Brothers shares closed at $145.45 on Monday, down 1.9 percent. The company has a market capitalization of $14 billion, with $11 billion in trailing twelve-month revenue and $1.6 billion in operating profit.

Peer results offer a mixed picture. D.R. Horton beat consensus in its fiscal Q3 with EPS of $3.20 versus $2.99 expected, though earnings still declined 4.8 percent year over year. PulteGroup beat estimates but reported a 200-basis-point gross margin contraction to 25 percent. NVR missed on both earnings and homebuilding revenue, with settlements falling 8 percent to 5,058 units.

Historical post-earnings returns for Toll Brothers show a positive one-day move in 12 of the last 20 earnings dates, with a median positive gain of 3.9 percent and median negative move of 4.1 percent. The most recent report on May 19 produced a 9.8 percent one-day gain, followed by a 25.4 percent return over 21 days.

The earnings call on Aug. 18 will provide updated full-year guidance and management's view on the spring selling season. Investors will watch whether the company's affluent buyer base maintains demand as mortgage rates hover near 6.7 percent and whether margin compression persists into fiscal 2027.

This article is for informational purposes only and does not constitute investment advice.