On Wednesday, Evercore ISI adjusted the price target for Toll Brothers (NYSE: NYSE:TOL), a luxury homebuilding company, increasing it to $184 from the previous $181 while maintaining an Outperform rating on the stock.
The firm took note of Toll Brothers' fourth-quarter performance, which, despite posting strong results, was overshadowed by the company's margin guidance. The updated margin outlook was notably lower than expected, despite Toll Brothers' robust average selling price (ASP), positive demand outlook following the election, and a decrease in incentives.
"We suspect the company is incorporating a hefty dose of conservatism in its figures, and management itself pointed out that its share buyback guidance was steadily increased over the course of FY24," said the analysts.
Furthermore, Toll Brothers has reaffirmed its long-term operating margin guidance, aiming for a 17-18% margin, which is slightly higher than their forecast for fiscal year 2025.
The company's commitment to transitioning towards a business model that is less dependent on owning large land inventories was also highlighted. This "land-light" strategy is expected to enhance the company's ability to generate strong cash flow and facilitate share repurchases across various market conditions.
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