Toll Brothers Inc. (TOL) Earnings & Analysis

Latest quarter

Toll Brothers reported Q3 FY2026 revenue of $2.7 billion, above the $2.6 billion consensus. Adjusted earnings per share were $2.97, also above the $2.90 consensus.

Revenue declined from $2.9 billion a year earlier, while diluted earnings per share fell from $3.73. The company attributed the decline in home sales revenue mainly to fewer deliveries, partly offset by a higher average delivered price. Its filing said the lower delivery count reflected a smaller beginning backlog and fewer speculative-home deliveries, partly offset by faster construction.

Toll Brothers reported gross margin of 23.5%, compared with 25.2% a year earlier, and operating margin of 13.5%, versus 16.6%. The filing attributed higher home sales costs as a share of home sales revenue principally to increased incentives on speculative homes. Free cash flow was $219.6 million, down from $344.9 million a year earlier.

The filing said net contracts increased in both units and value, primarily because the company had more selling communities, although contracts per community declined. It attributed higher selling, general and administrative expenses mainly to payroll, commissions and sales-center costs associated with the increase in communities.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Karl Mistry said the demand environment remained challenging in the third quarter and continued that way into the start of the fourth. Asked about sales trends, he said activity improved through the third quarter, but the usual July increase was more muted than expected. He cited higher mortgage rates, lower consumer confidence and renewed geopolitical uncertainty, while cautioning that it was too early to draw conclusions about the fourth quarter.

Mistry said Toll Brothers had reduced incentives modestly while managing pricing and sales pace. He said the company aims to sell speculative homes earlier in construction, when incentives are typically lower and customers have more opportunity to personalize their homes. Finished speculative inventory averaged fewer homes per community at quarter-end than at the start of the fiscal year, he said.

The CEO said luxury move-up homes were the largest contributor to home sales revenue and generated the highest margin among the company’s buyer segments. Executive Chairman Doug Yearley said the company was seeing more land opportunities for that business, which includes more build-to-order homes than speculative homes. Yearley said Toll Brothers faced less competition for the land it seeks in that segment.

Asked about land investment, Mistry said land banking had increased the proportion of sites controlled through options rather than ownership, while seller financing had also helped make acquisitions more capital-efficient. He said growth remained the company’s first priority for capital allocation.

On the quarter ahead, Mistry said much of the projected delivery volume was already in backlog, but the rest would need to be sold and settled during the quarter. He pointed to finished speculative homes and others under construction as potential sources of those deliveries. CFO Gregg Ziegler said differences between the expected timing of settlements in the third and fourth quarters reflected timing rather than a change in the underlying dynamics.

Guidance

Toll Brothers narrowed its FY2026 delivery forecast to 10,500–10,600 homes and raised its expected average delivered price to $995,000.00–$1.0 million. The company also reduced its expected FY2026 tax rate to 25.2%.

Toll Brothers increased its projected FY2026 share repurchases to $700.0 million.