Homebuilder Toll Brothers ( TOL ) is scheduled to release its fiscal first-quarter numbers before the market open February 27. The consensus calls for earnings of $0.61, versus $0.42 during the same period last year. TOL shares have fallen 4.6% on the year.
TOL was recently trading at $46.12, down $6.61 from its 12-month high and $12.70 above its 12-month low. Technical indicators for TOL are bullish with an upward trend. The stock has recent support above $45.00 and recent resistance below $48.25. Of the 13 analysts who cover the stock, five rate it a "strong buy", three rate it a "buy", four rate it a "hold", and one rates it a "strong sell". TOL gets a score of 69 from InvestorsObserver's Stock Score Report.
The housing market remains strong, and despite recent interest rate increases, and the reality of multiple increases coming this year, rates remain low enough to keep strength under the market. Low inventories across the nation will continue to prop up housing prices, and it will take several rate hikes before interest rates start to apply pressure on prices and demand. TOL sold off with the overall market at the beginning of February, but shares have already firmed and are moving in the right direction. The company reported weaker than expected earnings last quarter, which resulted in a quick sell off, but shares quickly rebounded and hit new highs before profit taking drove the stock lower with the overall market. The Street expects a positive earnings beat with a whisper number of $0.63 for the quarter, slightly above the $0.61 consensus. TOL trades at $46.17, with an average price target of $53.00.
Stock Only Trade
If you want a bullish hedged trade on the stock, consider an April 38/42 bull-put credit spread for a 30-cent credit. That's a potential 8.1% return (52.9% annualized*) and the stock would have to fall 8.3% to cause a problem.
If you want to take a bearish stance on the stock at this time, consider an April 50/55 bear-call credit spread for a $0.60 credit. That's a potential 13.6% return (88.9% annualized*) and the stock would have to rise 9.7% to cause a problem.
Covered Call Trade
Originally published on InvestorsObserver.com