Toll Brothers Q4 Earnings Miss Estimates, Revenues Top, Stock Down

Toll Brothers, Inc. TOL reported mixed fourth-quarter fiscal 2025 (ended Oct. 31) results, with adjusted earnings missing the Zacks Consensus Estimate and decreasing on a year-over-year basis. However, total revenues surpassed the estimate and increased from the prior year's reported figure.

Toll Brothers continues to face soft demand across several markets with its resilient business model that includes a healthy balance of build-to-order and spec homes, and a broad geographic footprint. The company remains disciplined in managing both pricing and sales velocity to optimize margins and overall returns. Also highlighted the resilience of its luxury-focused model, supported by a more affluent buyer base that is less affected by affordability pressures. However, elevated mortgage rates and a weak housing market remain notable headwinds.

Additionally, the company has agreed to sell roughly half of its Apartment Living portfolio and its operating platform to Kennedy Wilson for $380 million, with plans to exit the multifamily development business entirely once the remaining interests are sold.

Following the earnings release, TOL stock declined 3.8% yesterday in the after-hours.

TOL’s Quarterly Earnings & Revenue Discussion

The company reported adjusted earnings per share (EPS) of $4.58, which missed the Zacks Consensus Estimate of $4.87 by 5.9% and decreased 1.1% from the year-ago period.

Toll Brothers Inc. Price, Consensus and EPS Surprise

Toll Brothers Inc. price-consensus-eps-surprise-chart | Toll Brothers Inc. Quote

In the fiscal fourth quarter, total revenues of $3.42 billion beat the consensus mark of $3.32 billion. The top line increased 2.7% on a year-over-year basis.

Inside Toll Brothers’ Q4 Results

The company’s total home sales revenues were up 4.6% (above our projection of 0.2% year-over-year growth) from the prior-year quarter to $3.41 billion. Home deliveries were up 0.3% (above our expectation of a 2.3% decline year over year) from the year-ago quarter to 3,443 units. The average selling price (ASP) of homes delivered was $991,600 for the quarter, up 4.4% from the year-ago level of $950,200. Our model had expected ASP to be up 2.5% year over year to $972,700.

Net-signed contracts during the quarter were 2,598 units, down year over year from 2,658 units. The value of net signed contracts was $2.5 billion, down year over year from $2.7 billion. We had projected net-signed contracts to be up 5.2% in units and 4.4% in value for the quarter.
At the fiscal fourth-quarter end, Toll Brothers had a backlog of 4,647 homes, representing a year-over-year decrease of 22.5%. Potential revenues from backlog declined 15.4% year over year to $5.5 billion. The average price of homes in the backlog was $1,182,300, up from $1,078,700 a year ago.

The cancellation rate (as a percentage of signed contracts) for the reported quarter was 8.3%, up from 5.9% in the prior-year period.

TOL’s adjusted home sales gross margin was 25.5%, which contracted 50 basis points (bps) for the quarter. Selling, general and administrative (SG&A) expenses, as a percentage of home sales revenues, were 8.3%, which remained flat from the year-ago quarter.

TOL’s Balance Sheet & Cash Flow

The company had cash and cash equivalents of $1.26 billion at the fourth-quarter fiscal 2025 end compared with $1.3 billion at the fiscal 2024 end. The debt-to-capital decreased to 26% from 26.7% at the end of fiscal 2024. The net debt-to-capital was 15.3% compared with 15.2% at the fiscal 2024-end. At the end of the fiscal fourth quarter, the company had $2.19 billion available under its $2.35 billion revolving credit facility, set to mature in February 2030.

During fiscal 2025, TOL bought back approximately 5.4 million shares for a total of $651.6 million.

At the end of the fiscal fourth quarter, the company controlled about 76,102 lots, 56.6% of which were under control rather than owned outright, ensuring sufficient land for future expansion.

TOL Unveils Q1 FY26 Guidance

For first-quarter fiscal 2026, Toll Brothers expects home deliveries in the range of 1,800-1,900 units (compared with 1,991 units delivered in the prior-year quarter) at an average price of $985,000-$995,000 (compared with $924,600 in the year-ago quarter).

Adjusted home sales gross margin is expected to be 26.25%, implying a decline from 26.9% in the year-ago period. SG&A expenses are estimated to be 14.2% of home sales revenues, indicating a rise from 13.1% in the year-ago period. The company expects the effective tax rate to be 23.2%.

FY26 Guidance by Toll Brothers

For fiscal 2026, home deliveries are anticipated to be in the range of 10,300-10,700 units. The estimated range reflects a decline from the fiscal 2025 level of 11,292. It expects the period-end community count to be 480-490.

The average price of delivered homes is expected to be $970,000-$990,000, indicating growth from $960,200 in fiscal 2025.

Toll Brothers expects an adjusted home sales gross margin of 26%. This reflects a decline from the 27.3% reported in fiscal 2025.

SG&A expenses, as a percentage of home sales revenues, are now projected to be 10.25%, still an increase from the 9.5% reported in fiscal 2025. The company expects the effective tax rate to be 25.5%.

TOL’s Zacks Rank & Key Picks

Toll Brothers currently has a Zacks Rank #4 (Sell).

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The Zacks Consensus Estimate for ECG’s 2026 sales and earnings per share (EPS) indicates growth of 7.4% and 5.7%, respectively, from the year-ago period’s levels.
 
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