Toll Brothers Inc. (TOL): F3Q26 Recap: Accelerated Community Count Growth & Luxury Exposure Help Offset Operating Headwinds

Research evidence excerpt

Equity Research

20 August 2026 | 6:05PM EDT

Toll Brothers Inc. (TOL)

F3Q26 Recap: Accelerated Community Count Growth & Luxury Exposure Help Offset

Operating Headwinds

TOL

12m Price Target: $171.00

Price: $145.12

Upside: 17.8%

Stabilization in Product Mix and Pricing Reflected in

Profitability: We look for Toll’s move-up, luxury profile along with

operating discipline to support growth and profitability in the

coming quarters. Our view comes as management highlighted the

following on the call: 1) specs/community were approx flat

sequentially at 1.9, 2) incentives are similarly holding in line with

recent quarters at ~7.5% of ASP as the company balances pace vs

price, and 3) the outlook for high-single digit growth in community

count to continue in F2027 with the mix of move-up product

supporting our estimate for the adj. gross margin to hold in the

mid-20% range. We believe the skew of these new neighborhoods

will come through in ASP too, helping to offset the incremental

headwind to profitability from an increase in land held off balance

sheet. Additionally, with build times below pre-pandemic norms,

inventory turns are allowing for meaningful cash generation despite

the current pressures. This provides ample flexibility to invest in

future growth as well as shareholder returns. We model $923mn in

CFO and $703.8mn in buybacks in F2027, with upside should

conditions stabilize. More broadly, while elevated rates and the

geopolitical backdrop are weighing on consumers, we believe Toll’s

well-established strategy will allow for further industry relative

outperformance. That said, much of this is reflected in the valuation,

leaving us Neutral.

Focus on Luxury Move-Up Provides Greater Visibility to

Revenues: Although the cadence of F3Q sales was in line with

normal seasonality, the sequential post-July 4th lift was below

management’s expectations. This has continued into the first few

weeks of August as we model the F4Q monthly sales pace up a

modest 2% sequentially at 5.5. The company pointed to the increase

in rates this summer along with the situation in the Middle East as

factors to the muted activity. Given this, Toll is focused on the luxury,

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