Luxury homebuilder Toll Brothers (TOL) gave investors a peek into the high end of the housing market Tuesday after the closing bell, and the picture is a bit mixed. The company beat Wall Street's expectations, but the numbers also show a market that's getting tougher to navigate.
Here's the quick rundown: Toll Brothers reported earnings of $2.97 per share, beating the analyst consensus of $2.91 by about 2%. Revenue came in at $2.66 billion, also ahead of the $2.61 billion estimate. But that revenue was down from $2.95 billion in the same quarter last year.
Digging into the details, home sales revenues were $2.65 billion, compared to $2.88 billion a year ago. The company delivered 2,662 homes, down from 2,959 in the third quarter of fiscal 2025. The average price of those homes was $996,400, according to CEO Karl Mistry.
The margin story is worth noting. Adjusted home sales gross margin, which strips out interest and inventory write-downs, came in at 25.6%, down from 27.5% in the year-ago quarter. That's a meaningful drop, and it reflects the pricing pressure builders are feeling as buyers become more rate-sensitive.
But there's a silver lining: new contracts are picking up. Net signed contract value rose to $2.52 billion from $2.41 billion, and contracted homes increased to 2,508 from 2,388. That suggests demand is still there, even if buyers are being more selective.
Backlog, a key indicator of future revenue, was $6.24 billion at quarter's end, down slightly from $6.38 billion a year earlier. Homes in backlog were 5,312, compared to 5,492.
Mistry struck a cautiously optimistic tone. "Toll Brothers delivered solid third quarter results in a challenging market. We exceeded the midpoint of our guidance with $2.65 billion of home sales revenues, delivering 2,662 homes at an average price of $996,400," he said.
Investors seemed to focus on the margin compression and the year-over-year declines. Toll Brothers stock was down 1.31% to $140.99 in Tuesday's extended trading session.
For retail investors, the takeaway is that even the luxury segment isn't immune to the broader housing slowdown. But the uptick in contracts offers a glimmer of hope that the worst might be behind us.
