Toll Brothers, Inc. TOL has acquired one of the top private homebuilding companies — Keller Homes — to expand presence in Colorado Springs.
Colorado Springs is a dynamic housing market, which complements Toll Brothers’ operations in metro Denver and Fort Collins. Notably, the said market is rated as “#1 Hottest US Housing Market” by USA Today and #3 “Best Place to Live” by US News & World Report in 2020 and 2019, respectively.
Founded in 1983 by David Keller, Keller Homes serves a wide range of homebuyers, which include first-time, move-up and move-down buyers priced within mid-$400,000 to $700,000. Currently, it has approximately $44 million in backlog, consisting of 84 homes with an average price of $520,000 and four actively selling communities.
Importantly, Toll Brothers has also acquired the rights to purchase more than 300 lots that Keller controls throughout Colorado Springs.
Solid Expansion & Favorable Housing Markets Bode Well
Toll Brothers has secured some of the most sought-after urban locations in the country, where land is scarce and approvals are not easy to obtain. The company has been expanding geographically via selective acquisitions.
During second-quarter fiscal 2020, it acquired all assets and operations of Thrive Residential — an urban in-fill builder with operations in Atlanta, Georgia and Nashville, Tennessee. Management is now targeting community count growth of at least 10% year over year for fiscal 2021, which will reflect accelerating land acquisition and development to meet the resurgence in homebuyer demand.
Shares of Toll Brothers have gained 39.2% in the past three months compared with the industry's 33.4% rally. The upside is likely to continue, given accretive acquisitions, its focus on affordable luxury communities, as well as solid housing market backdrop.
Owing to favorable housing market fundamentals, Toll Brothers has witnessed a rise in consumer demand, which in turn drove new orders. For third-quarter fiscal 2020, its net signed contracts or orders were up 26.4% year over year. Also, backlog grew 5.8% year over year to 7,239 homes.
With improving demographics, low interest rates, reviving job market and limited new and resale inventory in many markets, the company is optimistic about the opportunities that lie ahead.
Toll Brothers — which share space with PulteGroup, Inc. PHM, M.D.C. Holdings, Inc. MDC and D.R. Horton, Inc. DHI in the same industry — currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
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