After Toll Brothers TOL exceeded expectations for the third quarter of the fiscal year on Wednesday, The stock could continue to rise.

With a share price increase of over +80% since the beginning of the year, Toll Brothers stock has impressively outperformed the broader market and many of its homebuilding competitors, including KB Home KBH. and Lennar Corporation LEN which have each increased by over 50%.

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Toll Brothers Q3 Results

Toll Brothers delivered 2,814 homes at an average price of $968,000 and posted a quarterly record for third-quarter sales of $2.72 billion, up from $2.68 billion in the comparable quarter. This also beat estimates of $2.69 billion by 1%.

Third-quarter earnings per share of $3.60 were below the year-ago figure of $3.73 per share, but beat expectations of $3.28 per share by 10%. Toll Brothers has beaten earnings expectations in three of its last four quarterly reports and posted an average earnings surprise of 7.76%.

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Sales forecast and growth curve

Toll Brothers now expects full-year revenue in the range of $10.4 billion to $10.5 billion, up more than $200 million from the midpoint of its previous forecast. This is just below the Zacks Estimate of $10.52 billion, or 5% growth.

According to Zacks estimates, Toll Brothers’ revenue is expected to increase another 4% to $10.98 billion in fiscal year 2025.

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Additionally, Toll Brothers’ annual earnings are expected to increase 14% to $14.11 per share in fiscal 2024, compared to earnings of $12.36 in the previous year. Earnings per share in fiscal 2025 are expected to decrease by -1%, but projections of $13.91 per share would still represent 109% growth over the past five years, with earnings of $6.63 per share in 2021.

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Rating comparison

Toll Brothers’ positive outlook is made even more attractive by its valuation. Despite a monstrous year-to-date rally, Toll Brothers stock still trades at just 10 times forward earnings, a significant discount to the S&P 500’s 23.7 times. This is also below the Zacks Building Products-Home Builders industry average of 11.8, with KB Home at 9.8 and Lennar at 12.6.

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Conclusion

Following its third-quarter report, Toll Brothers stock carries a Zacks Rank #2 (Buy). After beating quarterly expectations, earnings estimates for this homebuilder are likely to trend higher, which should continue TOL’s very impressive rally.

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The story continues

Toll Brothers Inc. (TOL): Free Stock Analysis Report

KB Home (KBH): Free Stock Analysis Report

Lennar Corporation (LEN): Free Stock Analysis Report

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