Toll Brothers Inc (NYSE:TOL) Shares Fall on Q4 Earnings Miss and Margin Outlook

Toll Brothers Reports Mixed Q4 Results; Shares Decline on Margin and Outlook Concerns

Luxury homebuilder Toll Brothers Inc (NYSE:TOL) reported financial results for its fiscal fourth quarter ended October 31, 2025, delivering a top-line beat but falling short on profitability. The market's immediate reaction was negative, with shares trading down approximately 4% in after-hours activity following the release.

Quarterly Performance vs. Estimates

The company's results presented a split picture when measured against Wall Street's expectations. Revenue from home sales climbed to $3.41 billion, a 4.7% increase from the prior year's quarter. This figure surpassed the analyst consensus estimate of $3.34 billion. However, the bottom line told a different story.

• Revenue: $3.42 billion (Reported) vs. $3.34 billion (Estimated) – Beat
• Earnings Per Share (Non-GAAP): $4.58 (Reported) vs. $4.94 (Estimated) – Miss

The earnings miss of roughly 7.3% appears to be the primary driver behind the after-hours stock decline. Management attributed the modest shortfall to the delayed closing of the sale of a portion of its Apartment Living portfolio, a transaction initially announced in September.

Key Highlights from the Earnings Release

The fourth quarter and full-year results underscore both the resilience and the pressures within the luxury housing market. The company highlighted record annual home sales revenue of $10.84 billion, driven by a 9% increase in community count. For the quarter, net income was $446.7 million, compared to $475.4 million in the same period last year.

Important operational metrics from the report include:

• Deliveries: 3,443 homes, essentially flat year-over-year.
• Net Signed Contracts: Value of $2.53 billion, down 4.9% from $2.66 billion in Q4 2024. The number of contracted homes also dipped slightly to 2,598 from 2,658.
• Backlog: The ending backlog value declined to $5.49 billion from $6.47 billion a year ago, though the average price of homes in backlog rose significantly to over $1.18 million.
• Margins: Both home sales gross margin and the adjusted metric (which excludes interest and write-downs) contracted slightly compared to the prior year. The adjusted home sales gross margin for the quarter was 27.1%, down from 27.9%.

In his statement, Chairman and CEO Douglas C. Yearley, Jr. noted the company executed well in a "choppy environment," emphasizing that its affluent customer base is "less impacted by affordability pressures." He also pointed to the company's disciplined land acquisition strategy and strong balance sheet.

Forward Guidance and Analyst Expectations

Looking ahead, Toll Brothers provided detailed financial guidance for the first quarter and full fiscal year 2026. This outlook offers a direct point of comparison with existing analyst forecasts.

The company's full-year delivery guidance of 10,300 to 10,700 units implies a revenue range that appears cautious relative to analyst sales estimates of $10.83 billion. More notably, the company projected its full-year adjusted home sales gross margin to be 26.0%, a meaningful step down from the 27.3% achieved in FY2025. It also expects its SG&A expense as a percentage of home sales revenue to rise to 10.25% from 9.5%.

For the upcoming first quarter, the company guided for an adjusted gross margin of 26.25% and an SG&A ratio of 14.2%, reflecting typical seasonal inefficiencies. The implied Q1 revenue based on delivery and price guidance is approximately $1.77-$1.89 billion, which aligns with the lower end of the analyst sales estimate of $1.85 billion.

Market Reaction and Summary

The negative after-market price action suggests investors are focusing on the earnings miss, the contraction in profitability metrics, and a forward outlook that anticipates further margin pressure in the coming year. While the company continues to demonstrate strength in revenue generation and community growth, the guidance indicates a challenging operating environment that may compress earnings power.

The quarter solidifies Toll Brothers' position in the luxury segment but also highlights the broader market's sensitivity to interest rates and economic uncertainty. The company's strategic exit from the multifamily development business, via the pending sale to Kennedy Wilson, aligns with its focus on its core homebuilding operations and capital efficiency.

For a detailed look at historical earnings, future estimates, and analyst projections for Toll Brothers, visit the TOL earnings and estimates page.

Disclaimer: This article is for informational purposes only and does not constitute investment advice, financial analysis, or a recommendation to buy or sell any security. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.