Toll Brothers Inc. reported fiscal third-quarter earnings after the market close on Tuesday, posting mixed results that underscored shifting dynamics in the U.S. housing market. The luxury homebuilder posted adjusted earnings of $2.92 per share on revenue of $2.62 billion for the three months ended July 31, marking sequential improvements of 7% and 4% respectively.
Year-over-year comparisons, however, reflected broader industry challenges. Earnings fell 22% from the same period a year earlier, while revenue declined 11%. Gross profit margin held at 25.2%, but operating income and EBITDA both slipped roughly 6% on a trailing basis. The company attributed the margin compression to elevated construction costs and land acquisition expenses, despite sustained demand for premium properties.
Luxury home sales rose 6.2% year-over-year, contrasting with a 5.4% decline in starter home sales. Toll Brothers highlighted recent expansions into upscale communities in Idaho, South Carolina, New Jersey, Nevada, Utah, and Texas, emphasizing its "Design Studio concept" as a differentiator in the high-end segment. The company has opened multiple new developments in these markets over the past year.
Analysts maintained a bullish stance following the report. The average price target stands at $168.20, implying a 16% upside from Tuesday’s closing price of $145.45. The forward price-to-earnings ratio was cited at 11.4, while earnings-per-share estimates have edged up 0.66% over the past 60 days. Revenue estimates have remained unchanged during the same period.
The results follow a fiscal second-quarter beat in May, when Toll Brothers exceeded expectations by 5.8% with earnings of $2.72 per share and revenue of $2.53 billion. Investors will scrutinize the company’s ability to sustain margins amid ongoing cost pressures and evolving buyer preferences.
