On Wednesday, Toll Brothers Inc. (NYSE:TOL) received a reaffirmed Buy rating and a steady price target of $150.00 from BofA Securities, following a robust fiscal second-quarter performance that surpassed expectations. The luxury homebuilder reported earnings per share (EPS) of $4.55 for the quarter ending in April, exceeding both BofA Securities' projection of $3.94 and the consensus estimate of $4.14.
The company's financial success was attributed to higher-than-anticipated home deliveries, average selling price, gross margin, and well-managed selling, general and administrative (SG&A) expenses. Toll Brothers saw its home sales revenue climb by 6.3% year-over-year to $2.65 billion, significantly outperforming the forecasted $2.31 billion. The number of homes closed increased by 6.0% compared to the previous year, with the average price remaining stable.
Despite a slight year-over-year dip in adjusted home sales gross margin to 28.2%, the figure still came in above the company's guidance of 27.6%. The fiscal second quarter also saw net orders grow by 30.3% year-over-year to 3,000 units, although this was below BofA Securities' expectations. Toll Brothers reported other income of $203.7 million for the quarter, which included a notable $175.2 million pre-tax land sale, contributing $1.17 to the EPS.
The company has also increased its land acquisition efforts, purchasing 3,470 lots for $472.0 million in the second fiscal quarter, compared to 2,620 lots for $463.2 million in the first fiscal quarter of 2024. BofA Securities highlighted the second quarter's results as impressive and considers the company's gross margin outlook to be on the conservative side. The firm's endorsement of Toll Brothers' stock remains unchanged with a continued Buy recommendation.
InvestingPro Insights
Following the positive outlook from BofA Securities on Toll Brothers Inc. (NYSE:TOL), the InvestingPro platform offers additional insights that could be of interest to investors. Notably, Toll Brothers has consistently raised its dividend for the past three years, signaling a commitment to returning value to shareholders. This aligns with the recent dividend growth, which has been marked at 15.0% over the last twelve months as of Q1 2024. Moreover, the company's stock is trading at a low P/E ratio of 8.18, suggesting that it may be undervalued relative to its near-term earnings growth potential.
InvestingPro data further shows that Toll Brothers has a robust market capitalization of $12.47 billion, and its stock has experienced a significant price uptick, with a 103.19% return over the past year. The company is also operating with a moderate level of debt, and its liquid assets exceed short-term obligations, providing financial stability. These metrics, coupled with a strong return over the last month of 14.42%, position Toll Brothers as an attractive investment option for those looking to capitalize on the real estate sector's potential.
For more detailed analysis and additional InvestingPro Tips, investors can visit https://www.investing.com/pro/TOL. There are 13 more tips available on the platform, and by using the coupon code PRONEWS24, users can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enhancing their investment strategy with comprehensive data and expert insights.
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