December 9, 2025 — New York Stock Exchange: TOL
Toll Brothers, Inc. (NYSE: TOL), the largest U.S. builder of luxury homes, is under pressure today after reporting fiscal Q4 2025 results that combined a solid revenue performance with softer margins, weaker cash flow, and a cautious outlook for 2026.
Shares are trading around $136 in early Tuesday action, down roughly 2% from Monday’s close of $138.94, as investors digest an earnings-per-share (EPS) miss and guidance that points to lower deliveries next fiscal year. Even after the pullback, the stock remains up around 8–10% year-to-date and not far from its 52‑week high near $157. [1]
Below is a deep dive into what Toll Brothers just reported, how Wall Street is reacting, what the latest forecasts say, and what it all could mean for Toll Brothers stock going into 2026.
Q4 2025: Revenue Beat, EPS Miss and Margin Compression
Toll Brothers reported results for its fiscal fourth quarter ended October 31, 2025 after the close on Monday, December 8. [2]
Headline numbers
- Home sales revenue: $3.41 billion
- Up from $3.26 billion a year ago (mid‑single‑digit growth) [3]
- Net income: $446.7 million
- Diluted EPS:$4.58, down from $4.63 in Q4 FY 2024 and below consensus estimates around $4.9–$4.95 per share [4]
- Homes delivered: 3,443 vs. 3,431 a year earlier [5]
In other words, Toll managed to grow revenue and deliveries modestly, but earnings and profitability moved in the wrong direction.
Margins under pressure
The market’s biggest focus is on margins:
- Home sales gross margin: 25.5% vs. 26.0% last year
- Adjusted home sales gross margin: 27.1% vs. 27.9% a year ago
- Operating income: $564 million, down 7–8% year-over-year [6]
QuiverQuant and other earnings recap services point to a 5% increase in cost of sales year-over-year and note that both gross and operating margins narrowed despite revenue growth, a sign of higher construction costs, incentives, or mix shifts. [7]
Cash flow and balance sheet
On the cash-flow side, the story is also softer:
- Cash from operating activities: about $370 million, down roughly 46% year-over-year [8]
- Cash and equivalents at quarter-end: $1.26 billion
- Net debt-to-capital: 15.3%, slightly improved from last year’s 15.2% [9]
The company continues to return capital aggressively:
- Share repurchases FY 2025: 5.4 million shares for $651.6 million
- Q4 alone saw 1.8 million shares bought back for $249.1 million [10]
Toll also maintains solid liquidity, including $2.19 billion available under its $2.35 billion revolver at year-end. [11]
Backlog and demand signals
Backlog is the best “visibility” metric for future revenues—and here the tone is more cautious:
- Backlog value: $5.49 billion vs. $6.47 billion last year
- Backlog units: 4,647 vs. 5,996 units a year ago
- Average price per home in backlog:$1.18 million, up from about $1.08 million (+9.6%) [12]
So Toll has fewer homes in backlog but at significantly higher price points. That suggests a shift toward more expensive communities and affluent buyers, which supports revenue but raises questions about volume sustainability in a softening housing market.
Cancellation metrics ticked up as well:
- Quarterly cancellations as a % of beginning backlog: 4.3% vs. 2.5% in Q4 2024
- As a % of signed contracts in the quarter: 8.3% vs. 5.9% last year [13]
Those rates are not alarming by historical housing-bust standards, but they point to more buyer hesitation in late 2025.
Full-Year 2025: Record Revenue, Lower EPS
For fiscal 2025 as a whole, Toll Brothers posted:
- Home sales revenue: $10.84 billion, up from $10.56 billion in FY 2024
- Homes delivered: 11,292 vs. 10,813
- Net income: $1.35 billion
- EPS:$13.49, down from $15.01 last year (though FY 2024 included a large one-time land sale gain) [14]
After adjusting for that 2024 land sale, EPS still slipped slightly, reflecting:
- Lower adjusted gross margins (27.3% vs. 28.4%)
- Slightly higher SG&A as a percentage of revenue (9.5% vs. 9.3%) [15]
Management highlights a 17.6% return on beginning equity, a growing community count (+9%), and robust cash generation of $1.1 billion over the year as key positives. [16]
From a long-term shareholder perspective, book value per share climbed to $87.25, and the company continues to pair a small dividend with large buybacks. [17]
Strategic Shift: Exiting Multifamily and Focusing on For‑Sale Luxury
One important element in this quarter is Toll’s planned exit from its multifamily development business:
- In September 2025, Toll announced an agreement to sell roughly half of its Apartment Living portfolio—including its operating platform—to Kennedy Wilson for about $380 million, with the buyer taking over management of Toll’s retained stakes.
- The transaction is now expected to close in Q1 FY 2026, and Toll intends to sell its remaining interests and fully exit multifamily. [18]
Management notes that Q4 EPS was “modestly below guidance” largely because the apartment sale did not close in time, delaying recognition of the related gains. [19]
While multifamily has been a profitable side business, exiting it should:
- Free up capital for Toll’s core for‑sale luxury homes
- Simplify the business model and reporting
- Potentially reduce volatility tied to large one-off asset sales
At the same time, Toll continues to expand its geographic and product footprint with new communities:
- Recent announcements include the Rivercrest townhome community in Reno, Nevada, plus new or expanded luxury communities in Washington, Georgia, Florida, and elsewhere. [20]
This ties into Toll’s strategy of growing community count 8–10% in fiscal 2026, even while overall housing demand remains choppy. [21]
FY 2026 Guidance: Lower Deliveries and a Cautious Tone
Perhaps the most important piece for Toll Brothers stock right now is forward guidance.
Management’s FY 2026 outlook calls for: [22]
- Deliveries: 10,300–10,700 homes
- Down from 11,292 in FY 2025
- Average selling price: $970,000–$990,000
- Adjusted home sales gross margin: ~26.0%
- SG&A as % of home sales revenue: ~10.25%
- Year-end community count: 480–490 (vs. 446 at FY 2025 year-end)
Financial media like The Wall Street Journal and MarketWatch have framed this as Toll “sounding a cautious note” for 2026, highlighting soft housing demand and the expectation of lower deliveries even as community count rises. [23]
In other words, Toll expects to sell fewer homes per community, countered partly by higher pricing and more communities.
The company also reiterated that:
- Luxury buyers remain relatively more insulated from affordability pressures.
- Demand is still rate-sensitive and uneven across markets. [24]
Investors will be listening closely to the earnings call scheduled for 8:30 a.m. ET on December 9, 2025, for more color on order trends, incentives, and regional demand patterns. [25]
Market Reaction: “Mixed” Print and Margin Softness
The initial headlines around the release have a consistent theme: mixed quarter, cautious guidance, stock down.
- Investing.com highlighted that a Q4 EPS miss overshadowed a revenue beat and noted the stock slipping about 4% in initial trading. [26]
- Benzinga described “mixed Q4 results citing ‘soft demand’” and flagged softer delivery expectations as a key concern. [27]
- Yahoo Finance’s live earnings coverage focused on “margin softness” as the catalyst for the selloff. [28]
- Barron’s also characterized the results as mixed, pointing to an EPS shortfall versus expectations despite higher revenue. [29]
Put simply, Toll’s report did not blow up the thesis, but it did challenge the market’s expectations for margins and growth after a strong run in the stock.
Analyst Sentiment and Price Targets: Bullish on Value, Split on Momentum
Despite the post‑earnings wobble, Wall Street analysts remain broadly constructive on Toll Brothers stock.
Consensus rating: “Buy” with double‑digit upside
Data aggregators show:
- Consensus rating: “Buy” or “Moderate Buy”
- Average 12‑month price target: in the $149–$152 range
- Implied upside: roughly 7–11% from recent prices
- Target range: lows around $92–$110, highs up to $161–$183 [30]
Key recent moves:
- J.P. Morgan upgraded TOL from Neutral to Overweight on December 4, 2025, setting a $161 price target (roughly mid-teens upside from current levels). [31]
- BofA Securities maintains a Buy/Strong Buy rating, recently trimming its target from $155 to $150 amid a more cautious industry backdrop. [32]
- Evercore ISI earlier downgraded the stock to Hold while still carrying a $160 target, reflecting valuation concerns after a strong run. [33]
From a fundamental forecast standpoint, analysts tracked by StockAnalysis project: [34]
- Revenue FY 2025 (just completed): about $10.9B
- Revenue FY 2026: roughly flat to slightly lower around $10.8B
- EPS FY 2025: ~13.9 (consensus, slightly higher than reported GAAP EPS due to adjustments)
- EPS FY 2026: modestly higher at ~14.1, implying low single-digit earnings growth
In short, the Street is not expecting explosive growth, but it does see Toll as a profitable, cash‑generative business whose shares still trade at an attractive valuation.
Zacks Rank: “Sell” despite broker “Buy” consensus
One notable outlier is Zacks Investment Research. In a piece syndicated via Finviz, Zacks notes: [35]
- The average broker recommendation (ABR) on TOL is equivalent to a Buy.
- However, the Zacks Consensus EPS estimate for the current year has been revised down about 1.4% in the past month, indicating increasing analyst pessimism.
- As a result, Toll currently carries a Zacks Rank #4 (Sell), implying a higher probability of near‑term underperformance based on earnings estimate trends.
Zacks essentially warns investors not to rely solely on broker ratings, arguing that downward estimate revisions could be a red flag even when targets appear supportive.
This split—broker “Buy” vs. quant “Sell”—captures today’s tension in Toll Brothers stock: strong long-term fundamentals and value metrics vs. softer near-term momentum in earnings and demand.
Valuation: Cheap for a High‑ROE Luxury Franchise
Despite cyclical risks, Toll Brothers does not look expensive by traditional metrics:
Key valuation data from Google Finance and company filings: [36]
- Share price: ~$136 (early December 9)
- Market cap: ~$13.1 billion
- Trailing P/E: around 10.0x
- Price-to-book: about 1.66x
- Dividend yield: roughly 0.7% (quarterly dividend of $0.25 per share)
Against that, Toll delivered:
- A 17.6% return on beginning equity in fiscal 2025
- Healthy operating margins and adjusted gross margins in the high‑20% range historically
- Conservative net leverage (net debt-to-capital ~15%) [37]
For many value-oriented or income‑oriented investors, this combination—double‑digit ROE, low‑teens or sub‑teens P/E, modest leverage, steady dividend—is precisely what makes large homebuilders attractive, despite their cyclical exposure.
Industry Backdrop: Luxury Resilience in a Tough Housing Market
Toll operates in a housing market that is still far from “normal.”
Recent industry commentary highlights: [38]
- Mortgage rates have eased off their 2023 peaks but remain historically elevated.
- Affordability remains stretched for many buyers, especially in the entry-level and move‑up segments.
- Construction costs, labor shortages, and lot availability continue to squeeze margins across the homebuilding industry.
- Several Zacks and Yahoo/WSJ pieces describe 2026 as another challenging year for homebuilders, with weak demand and rising supply putting pressure on pricing and profitability.
Within that landscape, Toll’s luxury positioning is a double-edged sword:
- Positive: Affluent buyers are less sensitive to mortgage rates and often pay larger down payments, supporting high average selling prices (backlog ASP now above $1.18 million). [39]
- Risks: Luxury demand can be more sensitive to stock market volatility, bonus season, and high‑end consumer confidence, which are hard to forecast and can swing quickly.
The company’s own Q4 commentary acknowledges “soft demand across many markets”, even as it points to brand strength and operational flexibility (build-to-order plus spec homes) as buffers. [40]
Other Notable Data Points: Insider Activity and Institutional Flows
QuiverQuant flags notable insider selling over the past six months: [41]
- 9 insider trades total
- 1 purchase and 8 sales
- CEO Douglas C. Yearley Jr., CFO Martin Connor, and other executives have sold shares in the open market, while one director made a small purchase.
Insider selling is common in companies that have rallied strongly and does not necessarily mean insiders are bearish on fundamentals, but it’s something some investors track as a sentiment signal.
On the institutional side, Quiver and MarketBeat data show hundreds of institutions increasing positions and hundreds decreasing, consistent with an actively traded, widely followed mid‑cap stock. [42]
Key Upside and Downside Drivers for Toll Brothers Stock
From today’s vantage point, here are the main forces that could drive TOL shares over the next 12–24 months. These are scenarios, not certainties:
Potential upside drivers
- Lower mortgage rates and improved buyer confidence
A faster‑than‑expected decline in mortgage rates could revive demand across the housing spectrum, particularly for move‑up and second‑home buyers who are Toll’s core audience. - Margin stabilization or improvement vs. guidance
If Toll can maintain adjusted gross margins above the ~26% guided level through better pricing, cost control, or mix shift, EPS could outpace current consensus. [43] - Community count growth and land discipline
Toll plans to grow community count 8–10% in FY 2026. If those openings ramp smoothly without heavy discounting, revenue and earnings could prove more resilient than feared. [44] - Capital returns
Continued buybacks at valuation multiples near 10x earnings can be meaningfully accretive to EPS and book value per share, especially with a strong balance sheet. [45]
Key risks and downside scenarios
- Deeper or more prolonged housing slowdown
If soft demand in 2025 is a prelude to a broader economic slowdown or labor-market weakness, orders, backlog and pricing could all come under more intense pressure. [46] - Further margin erosion
Rising incentives, input-cost inflation, or land impairments could push margins below guidance, undermining the “cheap but high quality” valuation story. [47] - Estimate downgrades and sentiment shifts
Zacks’s Rank #4 (Sell) already reflects negative estimate revisions. If more brokers follow by cutting EPS forecasts or ratings, the stock could see multiple compression even without a big earnings drop. [48] - Execution risk on exiting multifamily and expanding communities
Any hiccups in closing the Kennedy Wilson transaction, or missteps in land acquisition and community launches, could weigh on near‑term results. [49]
Bottom Line: A High‑Quality Builder at a Crossroads
Toll Brothers’ latest quarter underscores why the stock divides opinion:
- Bulls see a luxury homebuilder with:
- Strong brand and pricing power
- A fortress‑like balance sheet and healthy cash flows
- Double‑digit ROE, ongoing buybacks, and a modest dividend
- A valuation around 10x earnings and 1.6x book, which appears reasonable or even cheap for a company with Toll’s track record. [50]
- Bears and skeptics point to:
- An EPS miss, weaker cash flow, and margin compression in Q4
- Lower FY 2026 delivery guidance and rising cancellations
- A cautious 2026 outlook from management and financial media
- Negative estimate momentum reflected in a Zacks “Sell” ranking. [51]
For investors tracking TOL into 2026, the key questions now are whether demand stabilizes, whether margins hold the line at ~26%, and whether the company can convert its growing community base into sustained earnings growth—without sacrificing the pricing power that defines its luxury brand.
References
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