Key Takeaways:
Toll Brothers reported Q3 net income of $280.1 million, or $2.97 per diluted share, down from $3.73 a year earlier as home deliveries declined 10 percent.
The luxury homebuilder said demand remained solid, with net signed contract value rising to $2.52 billion on 2,508 homes from $2.41 billion on 2,388 homes in the prior-year quarter, according to the 8-K filed August 18.
Home sales revenues fell to $2.65 billion on 2,662 deliveries from $2.88 billion on 2,959 deliveries. Home sales gross margin was 23.9 percent, with adjusted margin of 25.6 percent, down from 25.6 percent and 27.5 percent respectively. The quarter included $39.6 million in joint-venture impairments and $17.7 million in pre-tax inventory impairments.
The company reaffirmed full-year guidance of approximately $10.5 billion in home sales revenues and 26.1 percent adjusted gross margin, while raising projected share repurchases to $700 million from $650 million. It returned $231 million to stockholders in the quarter and $506 million year-to-date through repurchases and dividends.
Backlog stood at $6.24 billion and 5,312 homes at quarter-end, with an average price per home of $1,174,400. The company spent $451.9 million to purchase approximately 2,784 lots during the quarter and controlled 75,486 lots, including 31,817 owned.
Toll Brothers ended the quarter with $1.06 billion in cash, stockholders' equity of $8.53 billion, a debt-to-capital ratio of 24.5 percent, and a net debt-to-capital ratio of 15.6 percent. SG&A rose to 10.0 percent of home sales revenues from 8.8 percent, while cancellations improved to 2.6 percent of beginning-quarter backlog from 3.2 percent.
For the nine months ended July 31, net income was $751.7 million, or $7.87 per diluted share, down from $899.8 million, or $8.95 per share, a year earlier. Home sales revenues totaled $7.02 billion on 7,052 deliveries, compared with $7.43 billion on 7,849 deliveries in the prior-year period. Adjusted home sales gross margin for the nine months was 26.1 percent, down from 27.4 percent.
The results beat consensus estimates of $2.93 per share and $2.62 billion in revenue, but the year-over-year decline reflects a softer luxury housing market as elevated mortgage rates weigh on buyer demand across the homebuilding sector, including peers such as Lennar and D.R. Horton. The buyback increase reflects management confidence in the balance sheet despite margin compression. Investors will watch the August 19 conference call for commentary on fourth-quarter pricing and land acquisition strategy.
This article is for informational purposes only and does not constitute investment advice.
