Toll Brothers, Inc. (NYSE:TOL), the nation’s leading builder of luxury homes has recently announced the results of its fourth quarter ending October 31, 2022. Net income of the company topped out at $640.5 million compared to its income of $374.3 million of the Q4 prior. It is worth noting that the net income also includes a $138.4 million ne pre-tax benefit, primarily related to the settlement of the company’s claims associated with a natural gas leak that occurred in Southern California 2015.
Home sales revenues were up 21% to $3.6 billion with delivered homes being up 13% as well, to 3,765 homes delivered. The adjusted home sales gross margin, which excludes interest and inventory write-downs, was 29% compared to 25.9% in Q4 FY2021.
Backlog value, meanwhile, was down 7% to $1.3 billion compared to Q4 FY2021. As of now, 8,098 houses remain in the company’s backlog of homes, which has dropped 21% from last year’s numbers.
In total, net income for the company throughout FY2022 amounted to $1.29 billion, up from $833.6 million in FY2021. Home sales revenues were up 15% at $9.71 billion while delivered homes were up 5% at 10,515. Net signed contract value was $9.07 billion, down 21% from FY2021 which mirrored a similar decrease in contracted homes, down 34% from last year at 8,255.
Despite this incredible success, however, it seems as though Toll Brothers alone hasn’t been able to shake general concerns around the current market, with its stock price dipping $45.94 following a middling day for stocks overall.
Toll Brothers CEO Offers Prospective Look into FY2023
Douglas C. Yearley, Jr., chairman and chief executive officer, stated:
“While FY 2022 was a year of records for our Company, the dramatic increase in mortgage rates since March presents a challenging market as we enter FY 2023. Many homebuyers are on the sidelines, waiting for clarity on the direction of mortgage rates and the overall economy.
“Our net signed contracts were down 60% in units and 56% in dollars in the fourth quarter, with no discernible change nearly halfway through our first quarter. Despite the softer market, FY 2023 is positioned to be another solid, high-margin year for us because of our strong backlog of 8,098 homes valued at $8.9 billion at fiscal year end.
“We are projecting an adjusted gross margin of 27.0% and earnings per share of $8.00 to $9.00 in FY 2023. This would increase our book value per share to above $60 at fiscal year-end 2023.
“As a primarily build-to-order home builder, we are strategically balancing the delivery of our large, high-margin backlog in FY 2023 with the generation of new sales for future deliveries. In this uncertain demand environment, our pricing strategy reflects, for each of our communities, an evaluation of local market dynamics, including elasticity of demand, the size of our backlog and the depth and quality of our land holdings in that market.
“We intend to continue making appropriate price adjustments as FY 2023 progresses. We also plan to grow our community count, replenish our supply of spec inventory in certain markets, and take advantage of shorter cycle times and lower building costs as trade has begun to show signs of increased capacity.
“Importantly, we have sufficient land under control to increase community count by 10% in FY 2023. We continue to assess all pending and future land transactions using rigorous underwriting standards based on current market conditions. Our balance sheet is solid, with over $3.0 billion of liquidity at fiscal year end and a net debt-to-capital ratio of 23.4%. In addition, we expect to generate significant cash flow from operations in FY 2023. This should enable us to continue reducing debt and returning cash to stockholders throughout the year.
“We believe the long-term prospects for the housing market remain positive despite recent weakness. Demographic and migration trends continue in our favor. In addition, there continues to be a substantial shortage of homes in America as housing starts have not kept up with population growth for at least the past 15 years. We believe these fundamental drivers will support the housing market well into the future.”
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