Toll Brothers, Inc.
) is set to report third quarter 2013 results on Aug 21. Last
quarter, it reported in line results. Let's see how things are
shaping up for this announcement.
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Factors to Consider this Quarter
During the second quarter earnings conference, Toll Brothers
lowered its third quarter expectation due to transfer of some of
its high margin deliveries of The Touraine to the fourth quarter
The Touraine is one of the largest projects undertaken by Toll
Brothers. It is an ultra-luxury residential building with 21
units, located in Manhattan's Upper East Side in New York City.
Toll Brothers announced that 16 of the 21 condominiums have
already been delivered. These 16 luxury condominiums are expected
to generate revenues of $50.7 million in the third quarter of
2013. The remaining five units under contract, worth $38.3
million, are expected to be delivered in fourth quarter 2013. The
company had previously expected to deliver all the units in the
Moreover, Toll Brothers now expects to deliver 25% more homes in
the fourth quarter than in the third quarter of 2013. The company
expects 20% more revenues in the fourth quarter of 2013 than in
third quarter 2013.
Our proven model does not conclusively show that Toll Brothers is
likely to beat earnings this quarter. That is because a stock
needs to have both a positive earnings expected surprise
prediction or ESP (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not
the case here as you will see below.
Negative Zacks ESP:
Toll Brothers currently has an ESP of -7.41%.
Zacks Rank #3 (Hold).
Toll Brothers' Zacks Rank #3 (Hold) lowers the predictive power
of ESP because the Zacks Rank #3 when combined with a negative
ESP makes positive surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and #5 (Sell rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions momentum.
Other Stocks to Consider
We see likely earnings beat coming from these 3 companies:
The Home Depot, Inc.
), Earnings ESP of +2.52% and a Zacks Rank #2 (Buy)
), Earnings ESP of +35.00% and a Zacks Rank #3 (Hold)
Taylor Morrison Home Corporation
), Earnings ESP of +2.70% and a Zacks Rank #3 (Hold)