TOL - Toll Brothers Stock Plunges Amid the Strongest Housing Market in a Decade
Toll Brothers (NYSE: TOL) reported earnings on February 25 that missed Wall Street expectations and sent the stock reeling over 16% (in what was admittedly a horrible week for stocks). This is the best homebuilding market since the Great Recession, yet Toll got clobbered. What is going on? It turns out that pivoting to the first-time homebuyer might be harder than it first appears.
First-quarter net income fell from $0.76 a share in 2019 to $0.41 in 2020, which was below Street expectations of $0.44 a share. Revenue fell 2% to $1.3 billion, while gross margin decreased to 18.3% from 21% a year ago. Toll Brothers sold 1,611 units at an average price of $805,300, versus 1,530 in the same quarter last year at an average price of $862,300.
Guidance was below Street expectations as well. CFO Martin Connor attributed the earnings miss to a "combination of delayed deliveries, unfavorable mix, and additional closeout costs related to certain older communities." These issues will persist into the next quarter as well.