TOL - Toll Brothers: Strong Q2 Demand Opens The Door To Multiple Expansion

2024-05-22 01:44:28 ET

Summary

• Toll Brothers reported strong fiscal Q2 results and raised delivery guidance, leading to a 1% increase in shares after hours.
• The company's luxury-oriented market has held up well, with average selling prices of $1.0 million and stable pricing supporting gross margins.
• TOL's backlog has served its purpose in reducing volatility, and the company has seen sequential growth in contracts and orders, indicating solid demand fundamentals.
• With demand resilient and potential Fed rate cuts coming, we may finally see multiple expansion past 10x, creating another leg of upside potential.

Toll Brothers ( TOL ) has been a very strong performer over the past year, with shares doubling as the housing market has proven resilient to elevated rates. The company reported strong fiscal Q2 results and raised delivery guidance, sending shares up another 1% after hours. I last covered Toll Brothers in February when I reiterated shares as a " buy ." In that piece, I highlighted my increased conviction shares could reach my $130 target. With the stock now having done so and with new financials in hand, we need to ask whether it is time to take profits. I see increased potential for an upside case with multiple expansion playing out. I would stay long Toll....

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