Credit Suisse's Optimistic Stance On Toll Brothers: Exploring The Impressive Growth And 2024 Projections

Credit Suisse analyst Daniel Oppenheim reiterated an Outperform rating on the shares of Toll Brothers Inc TOL and raised the price target from $73 to $90.

The analyst said 3Q/23 EPS of $3.73 far exceeded the consensus of $2.85 as closings, ASP, gross margins and SG&A as a percentage of revenue all exceeded expectations.

The analyst raised the 2023 EPS estimate to $11.95 (from $10.25) due to the upside in 3Q (strong closings and margins) and an expectation of higher closings in 4Q.

For 2024, the analyst now expects $9.55 (up from $8.00) based on what will likely be a healthy backlog at the end of 2023 and ongoing strength in margins.

TOL’s 77% y/y increase in orders exceeded consensus of a 60% y/y increase.

Even with the 77% yr/yr increase, 3Q23’s absorption was 35% below the level of 3Q21’s absorption and 9% below absorption in 3Q19, noted the analyst.

The analyst added that the 4% sequential decline was more modest than typical seasonal/sequential declines in 3Q.

Overall, the analyst thinks that TOL will continue to benefit from the limited competition from existing homes (low inventory), which pushes buyers to new homes.

The analyst’s $90 target price is based on a 1.25x multiple of 2024E book value.

Price Action: TOL shares are trading higher by 3.03% at $78.22 on the last check Wednesday.