RBC upgrades Toll Brothers to Outperform on stronger orders, margins
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RBC Capital on Thursday upgraded Toll Brothers (NYSE:TOL) to Outperform from Sector Perform, on account of stronger orders and resilient margins.
Shares of Toll Brothers (TOL), which climbed close to 6% on Thursday, gained 36% YTD.
"We believe sentiment has been overly negative on a relative basis given TOL's high-end, West Coast, and build-to-order exposures, with recent trends showing it has experienced improvement similar to peers," said analyst Mike Dahl.
"We expect outsized order growth through Q12024 given easy comps, while we also view TOL's long land bank as providing a margin advantage," he added.
While Dahl remains concerned about the sustainability of recent improvement, he views TOL as a relative outperformer given easy order comps, a more resilient margin profile, and an inexpensive valuation.
RBC raised its 2023/2024 EPS estimates for Toll Brothers (TOL) to $10.90/$10.25 from $8.73/$6.61, compared with $10.71/$9.02 consensus.
Price target was raised to $77 from $55, implying 18.3% potential upside to TOL's last close.
While sell-side ratings are largely bullish on the stock, SA Quant rates it Hold.