On Mar 27, 2014, we issued an updated research report on
Toll Brothers Inc.
D R HORTON INC (DHI): Free Stock Analysis
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TOLL BROTHERS (TOL): Free Stock Analysis
WILLIAM LYON HM (WLH): Get Free Report
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On Feb 25, this luxury homebuilding company reported mixed fiscal
first-quarter 2014 results wherein earnings beat the Zacks
Consensus Estimate by 39% but revenues missed the same by 3.8%.
Adjusted earnings of 25 cents increased significantly from 3
cents in the prior-year quarter on the back of strong margins.
The company reported revenues of $643.7 million, up 52.0% year
over year as aggressive pricing made up for weaker orders.
However, the company witnessed strong margin expansion on the
back of aggressive pricing and increase in operating leverage.
Toll Brothers is optimistic about the upcoming quarters on the
back of historically low interest rates, increasing pent-up
demand and limited supply of homes. The company expects to
deliver 5,100 to 5,850 homes in fiscal 2014 compared to the prior
expectation of 5,100 to 6,100 homes. The average price is
expected to range between $675,000 and $720,000 per home compared
with the prior expectation of $670,000 and $720,000. The company
expects fiscal 2014 gross margin to improve 175 to 200 bps over
2013 levels. The company continues to expect community count to
remain between 250 and 290 in fiscal 2014.
The positive guidance led to significant upward revision in
estimates for this Zacks Rank #3 (Hold) stock. The Zacks
Consensus Estimate for fiscal 2014 rose 2.5% and that for 2015
went up 0.4% over the last 30 days.
Overall, we are encouraged by Toll Brothers' aggressive
investment in well-positioned land, strong liquidity position and
greater pricing power in the luxury housing market. Moreover its
acquisition of the homebuilding business of Shapell Industries
has strengthened its presence in the upscale Californian housing
market. However, the company has been witnessing weakness in
orders for some time as the demand for luxury homes has slowed
down due to harsh weather. The company also faces difficult
Key Picks from the Sector
Some better-ranked stocks in the homebuilding sector include
William Lyon Homes
Taylor Morrison Home Corporation
DR Horton Inc.
). While William Lyon Homes and Taylor Morrison Home Corp. sport
a Zacks Rank #1 (Strong Buy), DR Horton carries a Zacks Rank #2