Earnings Highlights and Review: Toll Brothers’ Quarterly Revenues Jumped 22%; EPS Surged 43%

Research Desk Line-up: Hovnanian Enterprises Post Earnings Coverage

LONDON, UK / ACCESSWIRE / June 12, 2017 / Pro-Trader Daily publishes post-earnings coverage on Toll Brothers, Inc. (NYSE: TOL) following the Company’s announcement of its second quarter fiscal 2017 financial results on May 23, 2017. The home builder reported better than expected sales and earnings results and also provided its guidance for FY17 and the upcoming quarter. Our daily stock reports are accessible for free, and with those to look forward today you also will be signing up for a complimentary member’s account at:

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Earnings Reviewed

For the three months ended April 30, 2017, Toll Brothers’ total revenues of $1.36 billion and 1,638 units, increased 22% in dollars and 26% in units, compared to Q2 FY16 total revenues of $1.12 billion and 1,304 units. The Company’s revenue numbers surpassed analysts’ expectations of $1.25 billion. During the reported quarter Toll Brothers’ average price of homes delivered totaled $832,400 compared to $855,500 in the prior year’s same quarter.

For Q2 FY17, Toll Brothers’ gross margin, as a percentage of revenues, was 21.0% compared to 22.0% in Q2 FY16. The Company’s adjusted gross margin was 24.3% in the reported quarter compared with 25.7% in the prior year’s same quarter. During Q2 FY17, Toll Brothers’ income from operations of $138.2 million represented 10.1% of revenues compared to income from operations of $116.6 million which represented 10.5% of revenues in Q2 FY16.

Toll Brothers’ Q2 FY17 pre-tax income was $199.2 million compared to Q2 FY16’s pre-tax income of $140.4 million. The reported quarter figures included pre-tax inventory write-downs totaling $4.3 million, while the prior year’s quarter numbers included pre-tax inventory write-downs of $6.4 million.

For Q2 FY17, Toll Brothers’ net income totaled $124.6 million, or $0.73 per diluted share, compared to Q2 FY16 net income of $89.1 million, or $0.51 per diluted share. The Company’s results outperformed Wall Street’s forecasts of $0.62 per share.

Key Operating Metrics

During Q2 FY17, Toll Brothers’ net signed contracts of $2.02 billion and 2,511 units rose by 23% in dollars and 26% in units, compared to net contracts of $1.65 billion and 1,993 units in Q2 FY16. The average price of net signed contracts for the reported quarter was $804,200 compared to $825,500 in the prior year’s corresponding quarter. On a per-community basis, Toll Brothers’ net signed contracts were 7.82 units in Q2 FY17 compared to Q2 FY16 total of 6.80 units.

At the end of Q2 FY17, Toll Brothers’ backlog of $5.00 billion and 6,018 units increased 19% in dollars and 22% in units compared to Q2 FY16-end backlog of $4.19 billion and 4,940 units. At the end of the reported quarter, the average price of homes in backlog was $831,000 versus $848,600 at the end of the prior year’s comparable quarter.

Toll Brothers reported that cancellation rate (current-quarter cancellations divided by current-quarter signed contracts) was 3.5% in Q2 FY17 compared to 5.0% in Q2 FY16. As a percentage of beginning-quarter backlog, the Company’s reported quarter cancellation rate was 1.7% compared to 2.5% in the prior year’s same quarter.

Balance Sheet

As of April 30, 2017, Toll Brothers had $691.3 million in cash compared to $373.5 million at the end of the previous quarter and $423.2 million at the end of Q2 FY16. At the end of the reported quarter, the Company had $1.18 billion available under its $1.295 billion 20-bank credit facility, which is scheduled to mature in May 2021. Toll Brothers’ stockholders’ equity at the end of Q2 FY17 was $4.45 billion compared to $4.16 billion at Q2 FY16.

At the end of Q2 FY17, Toll Brothers’ debt-to-capital ratio was 45.4% compared to 45.7% for Q1 FY17 and 45.7% at the end of Q2 FY16.

Toll Brothers ended Q2 FY17 with approximately 46,600 lots owned and optioned compared to 47,800 lots in the previous quarter and 45,400 at the end of Q2 FY16. In the reported quarter, the Company purchased 623 lots for $107.0 million. Toll Brothers ended Q2 FY17 with 316 selling communities compared to 321 in Q1 FY17 end and 299 at the closure of Q2 FY16.

Outlook

For FY17, Toll Brothers is forecasting that it will deliver between 6,950 and 7,450 homes compared to previous guidance of 6,700 to 7,500 units. The Company estimates the average delivered price to be in the range of $775,000 and $825,000 per home for FY17, which translates to projected revenues in the band of $5.4 billion and $6.1 billion for FY17.

Toll Brothers’ reaffirmed its FY17 guidance for adjusted gross margin of between 24.8% and 25.3%, SG&A as a percentage of revenues of 10.6%, other income and income from unconsolidated entities of $160 million to $200 million, and effective tax rate of 37.5%.

For Q3 FY17 Toll Brothers is estimating deliveries of between 1,675 and 1,975 units with an average price of between $790,000 and $815,000. The Company expects its upcoming quarter’s adjusted gross margin to improve 10 basis points compared to the year ago same period.

Stock Performance

On Friday, June 09, 2017, the stock closed the trading session at $37.84, marginally slipping 0.05% from its previous closing price of $37.86. A total volume of 1.15 million shares have exchanged hands. Toll Brothers’ stock price surged 4.27% in the last three months, 16.04% in the past six months, and 28.58% in the previous twelve months. Moreover, the stock rallied 22.06% since the start of the year. The stock is trading at a PE ratio of 15.61 and has a dividend yield of 0.85%. At Friday’s closing price, the stock’s net capitalization stands at $6.22 billion.

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