FORT WASHINGTON, PA — Toll Brothers Inc. (NYSE: TOL) reported a 24% decline in fiscal third-quarter profit as fewer home deliveries and narrower margins outweighed higher contract activity, underscoring continued pressure on the U.S. housing market despite resilient demand from affluent buyers.
Net income fell to $280.1 million, or $2.97 per diluted share, for the quarter ended July 31 from $369.6 million, or $3.73 per share, a year earlier.
Home sales revenue declined 8% to $2.65 billion as deliveries dropped 10% to 2,662 homes. The average delivered price rose to $996,400 from $973,600.
Profitability also weakened. Home sales gross margin narrowed to 23.9% from 25.6%, while adjusted gross margin excluding interest and inventory write-downs fell to 25.6% from 27.5%.
Operating income declined 26% to $359.2 million. Selling, general and administrative expenses rose to 10% of home sales revenue from 8.8%.
The quarter included $17.7 million in home-sales inventory impairments, $10.1 million in land-related impairments and $39.6 million in impairments tied to unconsolidated joint ventures.
New orders provided a counterpoint to the earnings decline. Signed contracts increased 5% to 2,508 homes, while their value rose 4% to $2.52 billion.
The average price of newly contracted homes slipped to about $1 million from $1.01 million. Cancellations represented 5.4% of quarterly contracts, down from 7.5% a year earlier.
Backlog declined to 5,312 homes valued at $6.24 billion from 5,492 homes valued at $6.38 billion. The average backlog price increased to $1.17 million.
“Our performance underscores the strength of our luxury brand, the resilience of our affluent customer base, the successful execution of our differentiated business model, and our focus on operational efficiency,” Chief Executive Officer Karl K. Mistry stated.
Toll Brothers reaffirmed its full-year outlook, including deliveries of 10,500 to 10,600 homes at an average price of $995,000 to $1 million. The company expects adjusted home sales gross margin of 26.1% and approximately $10.5 billion in home sales revenue.
For the fourth quarter, the builder projects 3,450 to 3,550 deliveries at an average price between $995,000 and $1.005 million.
The company increased its fiscal 2026 share-repurchase target to $700 million from $650 million. It repurchased 1.4 million shares for $206.8 million during the third quarter and returned a total of $231 million to shareholders through buybacks and dividends.
Toll Brothers ended the quarter with $1.06 billion in cash and $2.24 billion available under its revolving credit facility. Its debt-to-capital ratio declined to 24.5% from 26% at the end of fiscal 2025.
The builder spent $451.9 million to purchase about 2,784 lots during the quarter and controlled approximately 75,500 lots at period-end. Its number of selling communities increased 12% to 471, supporting a projected full-year expansion of 8% to 10%.
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