Toll Brothers (NYSE: TOL) reported Q3 EPS of $0.90, $0.19 better than the analyst estimate of $0.71. Revenue for the quarter came in at $1.65 billion versus the consensus estimate of $1.55 billion.

FY 2020’s Third Quarter Financial Highlights (Compared to FY 2019’s Third Quarter):

• Net income and earnings per share were $114.8 million and $0.90 per share diluted, compared to net income of $146.3 million and $1.00 per share diluted in FY 2019’s third quarter.
• Pre-tax income was $151.9 million, compared to $186.9 million in FY 2019’s third quarter.
• Home sales revenues were $1.63 billion, down 7%; home building deliveries were 2,022, up 1%.
• Net signed contract homes were 2,833, up 26%; contract value was $2.21 billion, up 18%.
• Backlog in homes at third-quarter end was 7,239, up 6%; backlog value was $6.09 billion, up 4%.
• Home sales gross margin was 19.0%; Adjusted Home Sales Gross Margin, which excludes interest and inventory write-downs (“Adjusted Home Sales Gross Margin”), was 21.9%.
• Pre-tax inventory write-downs totaled $6.7 million.
• SG&A, as a percentage of home sales revenues, was 9.9%.
• Income from operations was $149.6 million.
• Other income, income from unconsolidated entities, and land sales gross profit was $3.6 million.

Financial Guidance:

• Fourth quarter deliveries of between 2,400 and 2,550 homes with an average price of between $815,000 and $835,000.
• Fourth quarter Adjusted Home Sales Gross Margin of approximately 21.5%.
• Fourth quarter SG&A, as a percentage of home sales revenues, of approximately 9.0%.
• Fourth quarter other income, income from unconsolidated entities, and land sales gross profit of approximately $5 million.
• Fourth quarter tax rate of approximately 26.0%.
• Community count at FYE 2020 of approximately 320 communities.
• Community count growth of at least 10% from FYE 2020 to FYE 2021.

Douglas C. Yearley, Jr., chairman and chief executive officer, stated: “We are very pleased with our overall performance in our third quarter, including revenues of $1.63 billion, net income of $114.8 million and backlog of $6.09 billion. Our adjusted gross margin of 21.9% in the quarter improved sequentially compared to 21.0% in the fiscal 2020 second quarter due to a shift in mix of deliveries and solid execution by our teams in the field. SG&A as a percentage of home sales revenue improved to 9.9% in the quarter from 10.6% in the prior year period, reflecting cost efficiencies initiated in our second quarter.

“Our third quarter net signed contracts were our highest third quarter ever in both units and dollars, and our contracts per community, at 8.5, were the highest third quarter in fifteen years. This strength has continued into August. We attribute the surge in demand to a number of factors, including historically low interest rates, a continued undersupply of homes, and consumers focused more than ever on the importance of home.

“With our well-located land holdings in twenty-four states and our strategic focus on expanding our geographic footprint, product lines and price points, we are well-positioned to take advantage of the resurgent housing market.”

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