Analyst Note| Brian Bernard, CFA, CPA |
We're maintaining our $44 fair value estimate for shares of no-moat-rated Toll Brothers following the firm's fiscal second-quarter earnings release. Given the adverse effect the coronavirus pandemic has had on the United States economy and Toll's position in some of the harder-hit states (40% of selling communities), we weren't surprised by the 22% year-over-year decline in new orders during the quarter. Still, signs of improving demand abound, and very strong year-over-year order growth during the fourth quarter of 2019 (up 18%) and first quarter of 2020 (up 31%) softened the impact from the second-quarter order setback. Toll's quarter-end backlog of 6,428 homes valued at $5.5 billion was only down about 1% in the number of homes and 3% in dollar value.