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Toll Brothers, Inc. (TOL)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 delivered strong top-line and earnings: home sales revenue $3.26B (+10% YoY), diluted EPS $4.63 (+13% YoY), and units 3,431 (+25% YoY). Adjusted home sales gross margin was 27.9%, beating guidance by 40bps, while SG&A was 8.3%, 30bps better than guidance .
  • Orders accelerated: net signed contracts $2.66B (+32% YoY) and 2,658 units (+30% YoY), with cancellations at industry-low levels (2.5% of beginning backlog) .
  • Guidance set a cautious Q1 FY25 margin low point (adjusted GM 26.25%) due to mix and elevated Q4 incentives, but management reaffirmed full-year adjusted GM of ~27.25% and operating margin sustainability in the 17–18% range .
  • Stock reaction catalysts: broad beats vs Q4 guidance (deliveries, adjusted GM, SG&A) and robust start to fiscal Q1 demand, offset by near-term margin headwinds from mix/incentives and slightly lower “other income” than guided .

What Went Well and What Went Wrong

What Went Well

  • Record year capped by a strong quarter: “our fourth quarter adjusted gross margin was 27.9%, beating guidance by 40 basis points… SG&A expense was 8.3%… 30 basis points better than guidance,” driving $4.63 EPS .
  • Orders strength despite macro volatility: “we delivered 3,431 homes… contracts were up over 30%… [and] have seen strong demand… encouraged for spring selling season” .
  • Capital efficiency and ROE: return on beginning equity of 23.1% for FY24; ongoing focus on spec mix and land-light strategies to sustain high returns .

What Went Wrong

  • Gross margin compression YoY: home sales gross margin fell to 26.0% from 27.5% in Q4 FY23, reflecting mix/incentives and higher inventory write-offs in the quarter .
  • Backlog down YoY: ending backlog $6.47B and 5,996 units, down 7% and 9% YoY, with average backlog price rising modestly .
  • “Other income” short of Q4 guidance: delivered $44.5M vs $47M guided, and Pacific region revenues declined YoY with lower ASPs, highlighting regional mix headwinds .

Financial Results

Quarterly sequential comparison

MetricQ2 2024Q3 2024Q4 2024
Total Revenues ($USD Billions)$2.84 $2.73 $3.33
Home Sales Revenues ($USD Billions)$2.65 $2.72 $3.26
Diluted EPS ($)$4.55 $3.60 $4.63
Adjusted Diluted EPS ($)$3.38 $3.60 $4.63
Home Sales Gross Margin %25.8% 27.4% 26.0%
Adjusted Home Sales GM %28.2% 28.8% 27.9%
SG&A % of Home Sales Revenues9.0% 9.0% 8.3%
Income from Operations ($USD Millions)$623.5 $497.2 $611.1
Other income/JV/land ($USD Millions)$203.7 $1.1 $44.5
Effective Tax Rate %25.9% 25.6% 23.5%
Delivered Units (homes)2,641 2,814 3,431
Average Delivered Price ($USD)$1,002,300 $968,200 $950,200
Net Signed Contracts ($USD Billions)$2.94 $2.41 $2.66
Backlog ($USD Billions)$7.38 $7.07 $6.47
Backlog Units (homes)7,093 6,769 5,996
Cancellations (% of beginning backlog)2.8% 2.4% 2.5%

Q4 YoY comparison (Q4 2023 vs Q4 2024)

MetricQ4 2023Q4 2024
Total Revenues ($USD Billions)$3.02 $3.33
Home Sales Revenues ($USD Billions)$2.95 $3.26
Diluted EPS ($)$4.11 $4.63
Net Income ($USD Millions)$445.5 $475.4
Home Sales Gross Margin %27.5% 26.0%
Adjusted Home Sales GM %29.1% 27.9%
SG&A % of Home Sales Revenues8.2% 8.3%
Delivered Units (homes)2,755 3,431
Net Signed Contracts ($USD Billions)$2.01 $2.66
Backlog ($USD Billions)$6.95 $6.47

Segment breakdown (Q4 2024 vs Q4 2023)

RegionUnits (Q4’23 → Q4’24)Revenue ($MM) (Q4’23 → Q4’24)ASP ($) (Q4’23 → Q4’24)
North422 → 498 412.3 → 501.3 $977,000 → $1,006,600
Mid-Atlantic380 → 495 388.2 → 446.0 $1,021,500 → $901,100
South717 → 947 659.9 → 819.9 $920,400 → $865,800
Mountain807 → 1,039 780.3 → 863.5 $966,900 → $831,100
Pacific429 → 452 710.3 → 629.1 $1,655,700 → $1,391,700
Total Home Sales2,755 → 3,431 2,951.9 → 3,260.0 $1,071,500 → $950,200

KPIs and operating metrics

KPIQ4 2024Q3 2024Q2 2024
Net Signed Contracts ($B / units)$2.66 / 2,658 $2.41 / 2,490 $2.94 / 3,041
Net Signed Contracts per Community (units)6.5 6.2 8.0
Backlog ($B / units / avg price)$6.47 / 5,996 / $1,078,700 $7.07 / 6,769 / $1,044,000 $7.38 / 7,093 / $1,040,200
Cancellations (% of beginning backlog)2.5% 2.4% 2.8%
Cancellations (% of signed in quarter)5.9% 6.4% 5.7%
Interest in Home Sales Cost (% of Home Sales Rev.)1.2% 1.2% 1.3%
SG&A (% of Home Sales Rev.)8.3% 9.0% 9.0%

Guidance Changes

MetricPeriodPrevious Guidance (Q3 2024)Actual / CurrentChange
Deliveries (units)Q4 20243,275–3,375 3,431 Raised (beat high end)
Avg Delivered Price ($)Q4 2024$940k–$950k $950,200 Achieved high end
Adjusted Home Sales GM (%)Q4 202427.5% 27.9% Raised (beat by 40bps)
SG&A (% of Home Sales Rev.)Q4 20248.6% 8.3% Lower (better)
Other income/JV/land ($MM)Q4 2024$47 $44.5 Lower
Tax Rate (%)Q4 202426.0% 23.5% Lower
Period-end Community CountQ4 2024410 408 Lower
Deliveries (units)FY 202410,650–10,750 10,813 Raised (beat high end)
Avg Delivered Price ($)FY 2024$975,000 $976,900 Slightly higher
Adjusted Home Sales GM (%)FY 202428.3% 28.4% Higher (beat)
SG&A (% of Home Sales Rev.)FY 20249.4% 9.3% Lower (better)
Other income/JV/land ($MM)FY 2024$260 $258.0 Slightly lower
Tax Rate (%)FY 202425.4% 24.7% Lower
Deliveries (units)Q1 2025—1,900–2,100 New issuance
Adjusted Home Sales GM (%)Q1 2025—26.25% New issuance
SG&A (% of Home Sales Rev.)Q1 2025—12.7% New issuance
Deliveries (units)FY 2025—11,200–11,600 New issuance
Adjusted Home Sales GM (%)FY 2025—27.25% New issuance
SG&A (% of Home Sales Rev.)FY 2025—9.4%–9.5% New issuance
Other income/JV/land ($MM)FY 2025—$110 New issuance
Tax Rate (%)FY 2025—25.5% New issuance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Spec strategy & marginsSpec deliveries >50% in 2H; spec adjusted GM ~26.1% vs BTO ~29.8%; long-term GM 27–28% 50/50 mix; spec margin ~200bps below average; BTO ~200bps above; Q1 margin low point (80% due to mix) Mix headwind near-term, strategy intact
Incentives & pricingNet price raised in ~60% communities; incentives used mainly for upgrades/closing costs Q4 incentives ~6.7% of ASP; expected to settle at ~5–6% with base price increases into spring Incentives normalizing
Rates/macro & demandQ3: rates lowest in a year; optimism for demand Post-election demand strong; rates stabilizing/modestly down; Q1 pacing ~2 contracts/community/month Improving
Regional trendsBroad-based demand; Florida B+ and watched Strength Boston–DC; Dallas/Houston strong; caution in Phoenix and Florida (inventory/affordability) Mixed by market
Land banking & lotsLots controlled ~72k; creative structures (profit participation, deferred payments) ~74.7k lots; target 60% optioned; selective underwriting; ROE focus Capacity to grow
Technology/efficiencyERP/CRM/HR systems implemented; SG&A leverage improving SG&A better vs guide due to fixed-cost leverage; efficiency focus sustained Operational gains continuing
Tariffs/supply chainN/APotential tariffs exposure assessed; expected de minimis, “wait and see” Monitor, low risk per mgmt

Management Commentary

  • “Our fourth quarter adjusted gross margin was 27.9%, beating guidance by 40 basis points… SG&A expense was 8.3%... earnings of $4.63 per diluted share… up 13% compared to last year” — Douglas C. Yearley, Jr., CEO .
  • “Since the start of our fiscal 2025… we have seen strong demand… optimistic for the start of the spring selling season… we increased community count by 10% and are targeting a similar increase in fiscal 2025” — CEO .
  • “We are projecting… Q1 adjusted gross margin… 26.25%… the low point of the year… fully expect it will be the low point… comfortable with full-year guide of 27.25%” — Martin Connor, CFO .
  • “We are comfortable with the 17% to 18% range of our operating margin… we did ~$1B cash flow in 2024, and we project a similar amount in 2025” — CFO .
  • “Our spec margin runs about 200bps below the average… build-to-order margin is about 200bps above” — CEO .
  • “Incentives in the fourth quarter were approximately 6.7%… we think we’re going to be settling in the 5%–6% range as the spring season approaches” — CEO/CFO .

Q&A Highlights

  • Operating margin and cash flow: Management reaffirmed 17–18% long-term operating margin and ~$1B FY25 operating cash flow projection .
  • Capital returns: FY25 buyback budget $500M (weighted to back half), with flexibility to do more depending on cash generation and opportunities .
  • Margin cadence and rate assumptions: FY25 margin trajectory assumes no rate declines; Q1 margin lower largely due to mix; remainder of year ~27.5% adjusted GM implied .
  • Demand pace: Q1 pacing ~2 contracts per community per month (~2,400–2,500 contracts implied), better than typical seasonal decline vs Q4 .
  • Regional and product trends: Strength in Northeast corridor and Texas (Dallas/Houston), caution in Phoenix and several Florida markets; Luxury strongest performer; active adult softer due to tough comps .
  • Tariffs: Management expects any tariff impact on supply chain to be limited; prepared to navigate if needed .

Estimates Context

  • Wall Street consensus (S&P Global) estimates were unavailable due to an SPGI daily request limit. As a result, comparisons vs consensus cannot be provided for Q4, Q3, and Q2 in this report. We attempted retrieval twice and were blocked by the limit.
  • Implication: Company results materially exceeded its own Q4 guidance on deliveries, adjusted margins, and SG&A, which typically drives upward estimate revisions, but we cannot quantify consensus movements here without S&P data .

Key Takeaways for Investors

  • Q4 beat-driven print: Broad beats vs guidance (deliveries, adjusted GM, SG&A) and stronger-than-typical early Q1 demand suggest positive near-term sentiment despite Q1 margin headwinds from mix/incentives .
  • Margin framework intact: FY25 adjusted GM targeted at 27.25% with Q1 as the low point; spec/BTO margin spread (~±200bps) and mix explain near-term compression .
  • Capital efficiency + returns: ROE 23.1% in FY24; sustained ~$1B operating cash flow expected in FY25; buybacks ($500M guide) remain a lever alongside growth investments .
  • Geographic/product diversification: Strong Northeast and Texas offset areas of caution (Phoenix, Florida); portfolio breadth and affluent buyer base underpin stability across rate cycles .
  • Orders momentum: Contracts up 30%+ in Q4; Q1 pacing better than seasonal norms supports volume trajectory into spring selling season .
  • Watch margin cadence and incentives: Expect normalization of incentives back to 5–6%; monitor mix effects, particularly Pacific/Mid-Atlantic contributions to margins .
  • “Other income” variability: Q4 came in modestly below guidance; FY25 assumes $110M, including sales of stabilized apartments—track JV/apartment transactions’ timing .