Toll Brothers’ third quarter results were met with a negative market reaction, as the company reported revenue ahead of Wall Street expectations but missed on non-GAAP profit forecasts. Management attributed the mixed performance to persistent affordability challenges in the broader housing market, which were partially offset by the firm’s focus on wealthier buyers less affected by higher mortgage rates. CEO Douglas Yearley noted that, despite the environment, “our luxury business is differentiated as we serve a more affluent customer who is less impacted by the affordability pressures that continue to impact the broader housing market.” The delay in closing the Apartment Living business sale also weighed on earnings per share, a factor management cited for the shortfall.
Is now the time to buy TOL? Find out in our full research report (it’s free for active Edge members).
Toll Brothers (TOL) Q3 CY2025 Highlights:
- Revenue: $3.42 billion vs analyst estimates of $3.32 billion (2.7% year-on-year growth, 3.2% beat)
- Adjusted EPS: $4.58 vs analyst expectations of $4.88 (6.1% miss)
- Adjusted EBITDA: $627.1 million vs analyst estimates of $702.2 million (18.3% margin, 10.7% miss)
- Operating Margin: 17.7%, down from 19% in the same quarter last year
- Backlog: $5.5 billion at quarter end, down 15% year on year
- Market Capitalization: $13.19 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Toll Brothers’s Q3 Earnings Call
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Stephen Kim (Evercore): Asked about the outlook for the active adult and move-down buyer segments. CEO Douglas Yearley explained that active adult buyers remain resilient due to their financial strength, and land acquisition remains disciplined with a focus on future community growth.
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John Lovallo (UBS): Inquired whether Toll Brothers’ guidance leaves room for upside if the market improves. Yearley responded that the outlook is intentionally conservative, assuming no improvement in housing market conditions or incentive reductions.
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Mike Dahl (RBC Capital Markets): Sought clarification on delivery guidance and the role of spec homes. Yearley detailed the breakdown of backlog, spec homes under construction, and new community openings, emphasizing confidence in their ability to meet delivery targets.
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Trevor Allinson (Wolfe Research): Questioned the drivers of stronger-than-usual order growth, especially in the North region. CFO Gregg Ziegler credited broad geographic strength and noted that future order commentary would be limited to observed deposit trends.
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Richard Reid (Wells Fargo): Probed the factors behind higher SG&A expenses. Yearley attributed increases to lower fixed cost leverage, wage inflation, and higher sales commissions, but reaffirmed efforts to control overhead costs.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will monitor (1) the pace of community count expansion and successful opening of new communities, (2) whether gross margins remain stable despite persistent incentive levels and a high mix of spec deliveries, and (3) continued resilience among luxury buyers, especially in core East Coast and coastal California markets. Execution on the planned exit from multifamily and redeployment of proceeds into homebuilding will also be key milestones.
Toll Brothers currently trades at $139.43, up from $136.10 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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