Demand for new homes has been edging high for the better part of the year. The record-low interest rate environment has helped fuel demand for homes. It would thus not come as a surprise if Toll Brothers Inc. (NYSE:TOL)Toll Brothers reports better than expected quarterly earnings heading into year-end.
Housing Industry Fundamentals
Builder stocks led by Toll Brothers have been on a tear, climbing by more than 20% for the year at the back of solid fundamentals in the industry. While the housing market’s run is expected to continue running higher, only builders with a competitive edge are well-positioned to continue growing in 2021.
The Fort Washington-based home construction company is poised to report earnings growth in the fourth quarter, helped by new orders growth of more than 60%. The company is believed to have benefited from rising housing demand and record low mortgage rates.
Likewise, the home builder looks set to report an increase in fiscal fourth deliveries, and average price per unit buoyed the continued undersupply and low interest rates. During the third quarter, the company said it expects home deliveries for the quarter to range between $815,000 to $835,000.
However, sales general and administrative expenses is expected to weigh down on the bottom line. In a bid to curtail expenditure from getting out of hand, Toll Brothers has resorted to making investments that comprise IT systems upgrades in the recent past.
Expansion Drive
Toll Brothers heads into the earnings session, having inked a joint venture through its Toll Brothers Apartment Living rental subsidiary to develop a 525-unit luxury apartment in Cambridge, Massachusetts.
The company has already secured a $142 million loan facility from Wells Fargo Bank. The joint venture underscores the company’s expansion drive as it looks to take advantage of the strong demand for new homes. In addition to expanding its footprint, Toll Brothers has also affirmed its commitment to returning value to shareholders. The company is fresh from issuing a $0.11 dividend per share held.