Toll Brothers (TOL) posts strong Q4 but rising rates have home contracts down 60%

December 6, 2022 4:57 PM EST

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Shares of Toll Brothers (NYSE: TOL) gained 2% after-hours Tuesday after easily beating on the top and bottom lines for its fourth quarter. However, the company also noted that home contracts were down 60% with no signs of a reprieve yet due to the rising interest rate environment

Net income and earnings per share were $640.5 million and $5.63 per share diluted for the quarter, versus the Wall Street consensus of $3.99. Net income in the quarter benefited from a previously disclosed $138.4 million net pre-tax benefit primarily related to the settlement of the Company's claims associated with a natural gas leak that occurred in Southern California in late 2015.

Home sales revenues in the quarter were $3.6 billion, up 21% compared to FY 2021's fourth quarter. While delivered homes were 3,765, up 13% from last year. Total revenue for the quarter came in at $3.71 billion versus the consensus estimate of $3.18 billion.

Weakness showed up in the signed contract figure, with net signed contract value down 56% from last year to $1.3 billion. While contracted homes were 1,186, down 60%.

Looking ahead, the company sees earnings per share of $8.00 to $9.00 in FY 2023. This compares to the consensus of $9.30.

“While FY 2022 was a year of records for our Company, the dramatic increase in mortgage rates since March presents a challenging market as we enter FY 2023," Chairman and CEO, Douglas C. Yearley, Jr., commented. "Many homebuyers are on the sidelines, waiting for clarity on the direction of mortgage rates and the overall economy. Our net signed contracts were down 60% in units and 56% in dollars in the fourth quarter, with no discernible change nearly halfway through our first quarter. Despite the softer market, FY 2023 is positioned to be another solid, high-margin year for us because of our strong backlog of 8,098 homes valued at $8.9 billion at fiscal year end. We are projecting an adjusted gross margin of 27.0% and earnings per share of $8.00 to $9.00 in FY 2023. This would increase our book value per share to above $60 at fiscal year-end 2023."

By Staff

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