$TOL Q3 2022 Earnings Report

$TOL Long

Toll Brothers is a company that designs, builds, markets, sells, and arranges to finance residential and commercial properties in the United States. In 2020, the company was the 5th largest home builder in the United States based on homebuilding revenue. Recently many many of the companies in the housing industry have beat all types of revenue records due to the housing bubble we are in right now and Toll brothers is no different. Last quarter, they had their highest revenue yet and as stated by the CEO, these strong results are expected to continue. Over the past couple of months, the housing prices have started to fall as there is a recession happening and most of the houses were already overvalued which caused fewer buyers. However, I still strongly believe that Toll Brothers will still beat estimates. After doing more research, The National Association of Realtors (NAR) has also reported that sales of built houses are slowing. Sales of existing homes dropped 5.9% from June and 20.2% year over year. The median price also dropped around $10,000 compared to June but is still up nearly 11% from last year. While these types of data might not be favorable to home builders, they also aren’t any recent news. Builder sentiment has been falling for eight consecutive months while the pace of single-family home building has declined for the last five months," wrote head NAHB chief economist Robert Dietz. Having all these in mind, Toll Brothers has still been able to beat every estimate this year. Additionally speaking, they haven’t missed any estimates since 2018 which means they were able to successfully go through any housing challenges that have happened over the past four years. The CEO also agrees with this information as he said “while demand is still solid, over the past month it has moderated from the unprecedented pace of the past two years as buyers adapt to higher mortgage rates and other macroeconomic conditions. However, the many fundamental drivers of housing demand remain firmly in place. These include favorable demographics, the significant imbalance between the supply and demand for homes, and migration trends. We believe these factors will support a healthy housing market over the long term. Our strategy of broadening our product lines, price points, and geographies, coupled with our industry-leading luxury brand, positions us well for the current environment. Our attractive land portfolio allows us to be highly selective with new land opportunities and enables us to continue using excess cash flow to reduce debt and return capital to shareholders.” This shows that the company is highly aware of the fact that the housing bubble won’t last forever and they are finding a way around it. Another indicator that proves my point is their EPS and revenue estimate. The expected EPS is $2.30 per share, a 30% increase over last year, and revenue is also expected to grow 11% to $2.5 billion in the third quarter. From these numbers, it can be seen that there is still a very strong demand for the housing market in the USA despite the economic challenges. Taking a look at Toll Brothers’ website, a reduction in customer visits can be seen which again links back to the demand for housing not being as strong as before just like what Toll Brothers were expecting. How similar stocks are doing: Looking at TopBuild, another company in the housing sector, things are lining up nicely for TollBrothers. They had a report around 20 days ago and they were able to beat the EPS by 20% while also beating the revenue by 8%. Another construction company that came out with a report recently was PulteGroup. While they were able to beat the EPS by 3%, they missed the revenue by 3%.

Initial reaction: Long Researched reaction: Long Top 10 Owners of Toll Brothers Inc Stockholder Stake Shares owned Total value ($) Shares bought / sold Total change The Vanguard Group, Inc. 10.07% 11,573,421 569,180,845 +117,959 +1.03% BlackRock Fund Advisors 8.45% 9,712,252 477,648,553 -293,590 -2.93% Greenhaven Associates, Inc. 4.66% 5,357,903 263,501,670 +145,700 +2.80% Massachusetts Financial Services ... 4.11% 4,724,844 232,367,828 +212,375 +4.71% Dimensional Fund Advisors LP 3.45% 3,963,121 194,906,291 +189,616 +5.02% SSgA Funds Management, Inc. 3.32% 3,821,085 187,920,960 -249,844 -6.14% Capital Research & Management Co.... 2.82% 3,244,217 159,550,592 +1,293,561 +66.31% Capital Research & Management Co.... 2.42% 2,781,997 136,818,612 +669,335 +31.68% JPMorgan Investment Management, I... 1.79% 2,061,477 101,383,439 +179 +0.01% Los Angeles Capital Management LL... 1.59% 1,829,051 89,952,728 +152,327 +9.08% P/E Ratio: 5.74 Market Cap: 5,253,299,130 Ceo: Estimate: +3% Time: Aftermarket