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Toll Brothers Inc TOL

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Morningstar’s Analysis

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Toll Brothers' Q2 Orders Plunge Amid the Pandemic but Signs of a Rebound Emerge

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.

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Company Profile

Business Description

Toll Brothers is the leading luxury homebuilder in the United States with an average sales price well above public competitors'. The company operates in 50 markets across 23 states and caters to move-up, active-adult, and second-homebuyers. Traditional homebuilding operations represents approximately 95% of the company’s revenue. Toll Brothers also builds luxury for-sale and for-rent properties in urban centers, primarily on the East Coast. The company's headquarters is in Horsham, Pennsylvania.

250 Gibraltar Road
Horsham, PA, 19044
T +1 215 938-8000
Sector Consumer Cyclical
Industry Residential Construction
Most Recent Earnings Apr 30, 2020
Fiscal Year End Oct 31, 2020
Stock Type Cyclical
Employees 5,100