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UBS maintains buy on Toll Bros with $140 stock price target

Published 2024-05-22, 11:34 a/m
TOL
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On Wednesday, UBS reiterated its Buy rating on Toll Brothers (NYSE:TOL), a luxury homebuilding company, with a price target of $140.00.

The firm's outlook aligns with the company's expectations for the third quarter of fiscal year 2023, forecasting deliveries between 2,750 and 2,850 units. This estimate slightly exceeds the consensus of 2,708 to 2,758 units. Toll Brothers anticipates an average selling price (ASP) for these deliveries to range from $950,000 to $960,000, which is above the UBS and consensus estimate of $933,000.

Toll Brothers also projects an adjusted home sales gross margin of 27.7%, which is in line with the consensus but slightly below UBS's estimation of 27.9%. The company estimates home sales, selling, general and administrative expenses (SG&A) to account for 9.2% of revenue, which is more favorable than the UBS and consensus predictions of 9.5% and 9.4%, respectively.

Additionally, Toll Brothers expects the end-of-period community count to reach 400, surpassing UBS's forecast of 393.

Looking ahead to fiscal year 2024, Toll Brothers has set delivery expectations between 10,400 and 10,800 units, surpassing both UBS's and the consensus estimates of 10,211 and 10,337 units, respectively.

The company has also raised its forecast for the delivery ASP to between $960,000 and $970,000, from a prior range of $940,000 to $960,000. This update slightly exceeds the UBS and consensus estimates of $959,000 and $957,000. The adjusted gross margin for home sales is anticipated to remain steady at 28.0%, consistent with UBS's forecast and slightly above the consensus.

Furthermore, Toll Brothers expects the period-end community count to be 410, which is in line with their previous forecast and slightly higher than UBS's estimate of 407. The company anticipates other income, income from unconsolidated entities, and gross margin from land sales and other to be $260 million, matching both UBS's estimate and the company's previous outlook. The projected tax rate stands at 25.5%, consistent with prior expectations.

For earnings per share (EPS), Toll Brothers now estimates approximately $14.00, which is notably higher than UBS's and the consensus estimates of $13.55 and $13.67, and above the company's earlier range of $13.25 to $13.75.

InvestingPro Insights

In light of UBS's recent endorsement of Toll Brothers (NYSE:TOL), InvestingPro data and tips offer additional insights that could be of interest to investors. With a market capitalization of $13.57 billion and a P/E ratio standing at 9.92, Toll Brothers appears to be trading at a value that may attract investors looking for potentially undervalued stocks. Additionally, the company's P/E ratio adjusted for the last twelve months as of Q1 2024 is even lower at 9.35, which could indicate a favorable earnings perspective relative to its stock price.

InvestingPro Tips suggest that Toll Brothers has a history of raising its dividend, doing so for the past 3 consecutive years, and maintaining dividend payments for 8 consecutive years, which could appeal to income-focused investors. Moreover, the company's stock price has experienced a significant uptick over the last six months, with a 53.23% price total return in that period, reflecting strong market performance.

It is important to note that analysts predict Toll Brothers will be profitable this year, which aligns with the company's own EPS estimate of approximately $14.00, outpacing UBS's and consensus estimates. For investors seeking more comprehensive analysis and tips, InvestingPro offers a total of 15 InvestingPro Tips for Toll Brothers, which can be accessed at https://www.investing.com/pro/TOL. To delve deeper into these insights, readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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