Toll Brothers Inc.
) is set to release its third-quarter fiscal 2014 results on Sep 3,
before the market opens. Last quarter, it posted a positive
surprise. Let's see how things are shaping up for this
Factors to Consider This Quarter
Toll Brothers expects fiscal 2014 gross margin to improve 175 to
200 bps over 2013 levels. Most of this gross margin improvement is
expected to occur in the third quarter. The company expects
operating margin to expand as well in the soon-to-be reported
quarter. The backlog conversion in third quarter is expected to be
Toll Brothers has been witnessing a leveling of luxury housing
demand since the fourth quarter of 2013 and this trend has
continued so far in fiscal 2014. During the second quarter of
fiscal 2014, Toll Brothers witnessed flat orders for the same
reason. However, orders recorded a high double-digit sequential
improvement during the quarter. This sequential improvement in
trend is likely to continue in the third quarter.
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
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:
The ESP for Toll Brothers is -2.17% as the Most Accurate
estimate stands at 45 cents while the Zacks Consensus Estimate is
higher at 46 cents
Zacks Rank #2 (Buy):
Toll Brothers carries a Zacks Rank #2 (Buy) which when combined
with a -2.17% ESP makes 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
Here are some other companies that can be considered as our model
shows that they have a favorable combination of elements:
- Ryland Group Inc. (
), Earnings ESP of +1.28% and a Zacks Rank #3 (Hold)
- Fortune Brands Home & Security, Inc. (
), Earnings ESP of +1.75% and a Zacks Rank #3
- Continental Building Products, Inc. (
), Earnings ESP of +10.53% and a Zacks Rank #3 (Hold).
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TOLL BROTHERS (TOL): Free Stock Analysis Report
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