Analyst Sees Promising Outlook For Toll Brothers Amid Strong Margins And Low Cancelation Rates

  • Credit Suisse analyst Dan Oppenheim reiterated an Outperform rating on the shares of Toll Brothers Inc TOL with a price target of $73.
  • The analyst has increased the 2023 EPS estimate to $10.25 from 8.40 and 2024 EPS estimate to $8.00 from $6.25 based on stronger margins and other income in 2023.
  • The revision is also based on higher deliveries in 2024 and the recovery in order trends, added the analyst.
  • According to the analyst, there is potential upside to 2023 based on cancelation rates remaining low and further improvement in construction cycles.
  • The analyst said that demand continued to be healthy in May, the start of TOL’s 3Q, with 3Q orders primarily translating into closings in 2024.
  • The analyst assumes that overall absorption will average 1.7 homes per community per month in 2023, up from 1.5 previously.
  • The analyst expects improvement in absorption in 2024 with 2024’s absorption getting back close to the absorption of 2.1 homes per community per month seen in 2022.
  • The key risk to the analyst’s forecast would be significant land impairments which the analyst does not see given the expectation for pricing and gross margins.
  • Price Action: TOL shares are trading lower by 1.4% at $67.52 on the last check Wednesday.
  • Photo Via Company
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