Why Is Toll Brothers (TOL) Up 2.3% Since Last Earnings Report?

Core Viewpoint - Toll Brothers reported mixed Q4 fiscal 2025 results, with adjusted earnings missing estimates while total revenues exceeded expectations, indicating a resilient business model despite challenges in the housing market [3][4][6]. Financial Performance - Adjusted earnings per share (EPS) for Q4 was $4.58, missing the Zacks Consensus Estimate of $4.87 by 5.9% and decreasing 1.1% year-over-year [6]. - Total revenues reached $3.42 billion, surpassing the consensus mark of $3.32 billion and increasing 2.7% year-over-year [6]. - Home sales revenues increased by 4.6% to $3.41 billion, with home deliveries up 0.3% to 3,443 units [7]. Market Conditions - The company faces soft demand across several markets but maintains a balanced approach with build-to-order and spec homes [4]. - Elevated mortgage rates and a weak housing market are significant headwinds impacting performance [4]. Portfolio Management - Toll Brothers agreed to sell approximately half of its Apartment Living portfolio to Kennedy Wilson for $380 million, planning to exit the multifamily development business entirely [5]. Backlog and Contracts - Net-signed contracts decreased to 2,598 units, down from 2,658 units year-over-year, with a total value of $2.5 billion [8]. - The backlog at the end of Q4 was 4,647 homes, a decrease of 22.5% year-over-year, with potential revenues from backlog declining 15.4% to $5.5 billion [8]. Cost Management - The adjusted home sales gross margin was 25.5%, contracting by 50 basis points [9]. - Selling, general and administrative (SG&A) expenses remained flat at 8.3% of home sales revenues [9]. Guidance - For Q1 fiscal 2026, home deliveries are expected to be between 1,800-1,900 units, with an average price of $985,000-$995,000 [13]. - For fiscal 2026, home deliveries are anticipated to be 10,300-10,700 units, reflecting a decline from fiscal 2025 [15]. Financial Health - Cash and cash equivalents at the end of Q4 were $1.26 billion, with a debt-to-capital ratio of 26% [11]. - The company repurchased approximately 5.4 million shares for $651.6 million during fiscal 2025 [12]. Market Sentiment - Estimates for the stock have been trending upward, with a consensus estimate shift of 17.21% [17]. - Toll Brothers currently holds a Zacks Rank 5 (Strong Sell), indicating expectations of below-average returns in the coming months [19].