(Bloomberg) -- Toll Brothers Inc. beat expectations for quarterly home orders as the strong stock market provided a lift to the luxury builder’s wealthy buyers, but a profit-margin projection fell short of estimates.
- The company reported 2,658 purchase contracts for the three months through October, up 30% from the same period a year earlier, according to a statement Monday. Analysts were expecting 2,456 orders, the average estimate in a survey compiled by Bloomberg.
- Toll projected an adjusted home sales gross margin of 26.3% for its fiscal first quarter, falling short of the 27.3% analysts were expecting.
Key Insights
- Toll’s customers tend to be well-off, with plenty of cash to tap from investments or sales of their previous homes, making them less sensitive to increases in borrowing costs.
- For buyers who depend on financing, the company has joined rivals in the business by offering discounted mortgage rates and other incentives to drive sales. Toll also has been adding more-affordable choices to appeal to a broader range of customers, and building more homes “on spec” to respond more quickly to demand.
- Toll has continued to see strong demand since its new fiscal year started six weeks ago, “which is encouraging as we approach the beginning of the spring selling season in mid-January,” Chief Executive Officer Douglas Yearley Jr. said in the statement.
- The company said it expects to deliver 11,200 to 11,600 homes homes in fiscal 2025. Analysts were expecting 11,414 on average.
Market Reaction
- Toll’s shares dropped slightly in late trading Monday. They had gained 52% this year through the close, outpacing the 17% increase for an S&P index of homebuilder stocks.
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- The company will hold a conference call on Tuesday at 8:30 a.m. New York time.
--With assistance from Prashant Gopal.
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