The year of builder earnings wound down with Toll Brothers reporting to mixed analyst reaction. The Wall Street Journal's Austen Hufford reported that home building deliveries fell in the North, Mid-Atlantic and South regions, but its average sales price rose 5.8% to $790,000.
While Hufford made no mention of margins, Toll's analysts seemed disappointed by the builder's 22.6% rate.
"Fourth quarter gross margins (excluding charges, including interest) rose 100 basis points sequentially and 50 basis points year over year to 22.6%, below our 23.3% estimate, largely driven by a 60 basis point negative impact from an increase in reserves for warranty and litigation. Looking forward, Toll expects fiscal year gross margins (including interest, excluding charges) of 22.7 to 23.1%, which we note represents a year-over-year improvement of 20 to 60 basis points over fiscal year 2015's gross margin of 22.5% (including interest, excluding charges) and is moderately below our estimate of 23.6%," wrote J.P. Morgan's Michael Rehaut.