Toll Brothers steps up to IBD Stock Of The Day status for Friday. The luxury homebuilder moved back in a buy zone as Treasury yields dip and optimism toward the Federal Reserve's rate-cut policy lifts real estate sector stocks.
Toll's building activity is fairly evenly spread across the U.S. Its Southern segment returned the highest revenue growth (45%) in 2023. Revenue in the North, Mountain and Pacific regions declined. Mountain region projects still contributed the highest revenue, at $2.75 billion. Pacific region homes had the highest delivered selling price, averaging $1.59 million, a 13% increase over 2022.
Homes sold in the South had the lowest price average, at $849,000, up 14% over 2022.
Stock Of The Day: Toll Brothers Earnings
Toll Brothers earnings and revenue have wobbled since October. For the company's fiscal third quarter, FactSet analyst project an 11% earnings dip and a 1% uptick in sales. Earnings growth over the prior four quarters average about 21%. Sales rose an average of just under 3%.
Fort Washington, Pa.-based Toll Brothers has not yet announced a reporting date for the quarter.
For the year, analyst consensus points to a flat outcome for earnings and sales. Outlooks could change rapidly once the Federal Reserve does kick into a rate-cutting cycle. Markets generally expect that shift to begin in September.
Analysts Lukewarm On Toll Brothers Stock
Meanwhile, analysts are predominantly lukewarm on TOL stock. Barclays has an underweight rating and trimmed its price target to 116, from 118, on July 12. Citi's price target is 125, down from 133, in a July 2 note that kept the neutral rating.
However, Evercore ISI, on July 15 hoisted its Toll Brothers target to 180, up from 177 and 31% above where shares traded on Friday. Evercore rates the stock at overweight.
Toll Brothers Stock
Toll Brothers stock jumped 4.8% to 139.02 on Friday, retaking a 135.37 cup-base buy point. Shares initially cleared that entry on July 18, but hasn't closed in buy range yet.
Shares remain in a buy range through 142.13.
The Stock of the Day is the top-ranked stock in IBD's Building-Residential/Commercial industry group. Toll Brothers shares are up about 35% so far this year. That lags behind gains of 45% for Green Brick Partners, 39% for Hovnanian Enterprises and 33% for KBHome.
But it holds Composite and EPS ratings of 97, and a Relative Strength Rating of 93.
Hovnanian, Green Brick and KBHome are all extended after recent breakouts, giving some sense of the current strength of the industry.
More broadly, building materials, installers and construction plays generally are on the upswing.
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