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Did Toll Brothers Beat Analysts’ Estimates in Fiscal 2Q16?

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Did Toll Brothers Beat Analysts’ Estimates in Fiscal 2Q16? PART 1 OF 5

Toll Brothers Reports a Big Increase in Revenues in Fiscal 2Q16

Toll Brothers’ fiscal 2Q16 revenues beat the Wall Street consensus

On May 24, 2016, Toll Brothers (TOL) reported fiscal 2Q16 revenues of $1.1 billion, slightly above the Wall Street consensus of $1.0 billion. This was a rise of 31% from the same quarter last year.

Toll Brothers Reports a Big Increase in Revenues in Fiscal 2Q16

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We’re starting to see the effects of rising home prices on housing demand, although the luxury end seems to be doing better than everything else. In some ways, the luxury end is being driven by foreign investors looking for diversification. When you look at home price appreciation combined with US dollar appreciation, the returns have been higher than those of most other investment alternatives.

Virtually all builders, from Lennar (LEN) and D.R. Horton (DHI) to PulteGroup (PHM) and CalAtlantic Group (CAA), have noted that the growth rate of average selling prices has begun to level off. If you are interested in trading the homebuilding sector via an ETF, you can look at the SPDR S&P Homebuilders ETF (XHB).

Deliveries and backlog

Deliveries in the second quarter rose 31% in dollar terms and 9% in units. This was big improvement from the first quarter, when deliveries fell in terms of units. Backlog is an indication of future revenues. It rose 20% in dollars and 13% in units. This was a deceleration from the previous quarter.

At the end of fiscal 2Q16, Toll Brothers had approximately 45,400 lots owned and optioned, compared to 43,800 at the end of fiscal 1Q16 and 45,000 a year ago.

The company finished the quarter with 299 selling communities compared to 291 in the previous quarter and 269 at the end of fiscal 2Q15.

For the first three weeks of the third quarter, the company has experienced flat contracts but a 25% increase in nonbinding deposits so far.

In the next part of this series, we’ll look at Toll Brothers’ pricing growth.

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