Hot stock to watch: Toll Brothers Inc (NYSE: TOL)

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Toll Brothers Inc (NYSE: TOL) stock rose 9.53% on May 27th, 2020 and continued its bullish momentum, rising over 1.4% on May 28th, 2020 (as of 11:24 am GMT-4; Source: Google finance) after the company said that deposits on new homes were up in recent weeks, which represents a potential sign of optimism for the luxury housing market. The deposits, which typically precede a binding sales contract by about three weeks, and is one of the main indicator of current market demand, were up 13% over the past three weeks compared to the same three-week period last year. The recent deposit-to-contract conversion ratio has remained consistent with pre-Covid-19 levels. Web traffic has also steadily increased from the lows that the company had experienced in mid-March and has returned to the same strong activity the company had enjoyed pre-Covid-19 in February. These early trends suggest the housing market may be more resilient than expected just two months ago. TOL had ended the second quarter with about $2 billion of liquidity, including $741 million of cash and marketable securities and $1.3 billion available under the $1.9 billion revolving credit facility, which does not mature until November 2024. With no significant debt maturities until February 2022, the balance sheet remains strong.

Due to the business disruption and the evolving and uncertain impact of the Covid-19 pandemic on the U.S. economy, the Company has withdrawn its full fiscal year 2020 guidance and intends to suspend providing such guidance for the foreseeable future.

TOL in the second quarter of FY 20 has reported the adjusted earnings per share of 59 cents, beating the analysts’ estimates for the adjusted earnings per share of 48 cents, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue of $1.55 billion in the second quarter of FY 20, missing the analysts’ estimates for revenue by 0.80%.

Moreover, in the second quarter of FY 2020, the Company has spent about $159.9 million on land to purchase approximately 1,579 lots. The Company ended FY 2020’s second quarter with 326 selling communities, compared to 328 at FY 2020’s first-quarter end and 311 at FY 2019’s second-quarter end.

Additionally, during the first half of the second quarter of FY 2020, the Company had repurchased about 4.3 million shares at an average price per share of $37.05, for the total purchase price of about $157.5 million, which represents 3% of shares outstanding as of FYE 2019. On April 24, 2020, the Company had paid its quarterly dividend of $0.11 per share to shareholders.

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