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Despite missing earnings expectations, Toll Brothers is positive on rest of year

Thanks to strong demand for housing

Luxury homebuilder Toll Brothers barely missed earnings estimates, causing the company to narrow its outlook for the year, according to an article in CNBC.

Overall, Toll Brothers’ revenue rose 18.3% to $1.50 billion, slightly missing revenue estimates of $1.51 billion. But despite the miss, the company is still positive on the year thanks to strong demand.

From the article:

"The unemployment rate is at a 15-year low, the economy is growing, the stock market is strong, and home prices continue to rise, putting equity in the pockets of those who may want to sell their existing home and move to a new one," Chief Executive Douglas Yearley said in a statement.

And looking ahead, the article stated that Toll Brothers also narrowed its full-year revenue forecast range to $5.6 billion-$6 billion from $5.4 billion-$6.1 billion, and cut the top end of its adjusted gross margin forecast to 25% from 25.3%, while retaining the lower end at 24.8%.

The company falls in line with the homebuilding industry’s feelings toward future demand. According to the most recent National Association of Home Builders and Wells Fargo Housing Market Index, confidence among homebuilders grew in August alongside the rising demand for new homes.

“Our members are encouraged by rising demand in the new-home market,” NAHB Chairman Granger MacDonald said about the report. “This is due to ongoing job and economic growth, attractive mortgage rates, and growing consumer confidence.”

Tolls Brothers is a little different though since it does cater to building luxury homes. Due to the major uptick in demand for houses from first-time homebuyers, homebuilders are switching gears from the luxury market to focus on starter homes.

Meanwhile, as noted in the CNBC article, the average selling price per home at Tolls Brothers sat at $791,400 in the third quarter. 

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