Let’s dig into the relative performance of Toll Brothers (NYSE:TOL) and its peers as we unravel the now-completed Q2 home builders earnings season.
Traditionally, homebuilders have built competitive advantages with economies of scale that lead to advantaged purchasing and brand recognition among consumers. Aesthetic trends have always been important in the space, but more recently, energy efficiency and conservation are driving innovation. However, these companies are still at the whim of the macro, specifically interest rates that heavily impact new and existing home sales. In fact, homebuilders are one of the most cyclical subsectors within industrials.
The 12 home builders stocks we track reported a decent Q2. As a group, revenues beat analysts’ consensus estimates by 2.8%.
Stocks--especially those trading at higher multiples--had a strong end of 2023, but this year has seen periods of volatility. Mixed signals about inflation have led to uncertainty around rate cuts. However, home builders stocks have held steady amidst all this with share prices up 4.1% on average since the latest earnings results.
Toll Brothers (NYSE:TOL) Started by two brothers who started by building and selling just one home in Pennsylvania, today Toll Brothers (NYSE:TOL) is a luxury homebuilder across the United States.
Toll Brothers reported revenues of $2.73 billion, up 1.5% year on year. This print was in line with analysts’ expectations, and overall, it was a solid quarter for the company with a decent beat of analysts’ earnings estimates and strong earnings guidance for the full year.
Douglas C. Yearley, Jr., chairman and chief executive officer, stated: “We are very pleased to report another quarter of strong results. In our third quarter, we delivered 2,814 homes at an average price of $968,000, generating record third quarter home sales revenue of $2.72 billion. Our adjusted gross margin, at 28.8% in the quarter, significantly exceeded guidance due to favorable mix and greater efficiencies in our home building operations, and our SG&A margin of 9.0% beat guidance by 20 basis points. This combination of revenue and margin outperformance drove earnings of $3.60 per diluted share in the quarter.
Interestingly, the stock is up 6.3% since reporting and currently trades at $142.
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Best Q2: Skyline Champion (NYSE:SKY) Founded in 1951, Skyline Champion (NYSE:SKY) is a manufacturer of modular homes and buildings in North America.
Skyline Champion reported revenues of $627.8 million, up 35.1% year on year, outperforming analysts’ expectations by 4.6%. It was an incredible quarter for the company with an impressive beat of analysts’ earnings estimates.
The market seems happy with the results as the stock is up 20.7% since reporting. It currently trades at $89.86.
Weakest Q2: TopBuild (NYSE:BLD) Established in 2015 following a spinoff from Masco Corporation (NYSE:MAS), TopBuild (NYSE:BLD) is a distributor and installer of insulation and other building products.
TopBuild reported revenues of $1.37 billion, up 3.7% year on year, falling short of analysts’ expectations by 2.3%. It was a weak quarter for the company with a miss of analysts’ earnings estimates.
As expected, the stock is down 8.2% since the results and currently trades at $390.53.
KB Home (NYSE:KBH) The first homebuilder to be listed on the NYSE, KB Home (NYSE:KB) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.
KB Home reported revenues of $1.71 billion, down 3.1% year on year, surpassing analysts’ expectations by 3.4%. Taking a step back, it was a stunning quarter for the company with an impressive beat of analysts’ backlog sales estimates.
The stock is up 22% since reporting and currently trades at $83.02.
NVR (NYSE:NVR) Known for its unique land acquisition strategy, NVR (NYSE:NVR) is a respected homebuilder and mortgage company in the United States.
NVR reported revenues of $2.61 billion, up 11.7% year on year, surpassing analysts’ expectations by 2.6%. Taking a step back, it was a strong quarter for the company with an impressive beat of analysts’ backlog sales estimates.
The stock is up 4.1% since reporting and currently trades at $8,984.
This content was originally published on Stock Story
