Toll Brothers' (TOL) earnings this year are likely to see an upside amid "unique" tailwinds such as a sustainable gross margin premium and strong core customer, Oppenheimer said Wednesday.
The homebuilder's customers are likely less exposed to volatility in mortgage rates and affordability challenges, Oppenheimer analysts Tyler Batory and Jonathan Jenkins said in a note to clients.
"We see TOL as a more defensive way to play the housing space in what is likely to be a choppy start to 2025, with inventory levels in many markets elevated, incentives high, and demand still choppy, especially on the lower end," they said.
Oppenheimer projects the company's 2025 earnings at $14.10 per share, with a path to $15.03 level, according to the note.
"This could come from a more constructive pricing backdrop (with fewer
incentives), closing volumes near the high-end of management guidance, and
incremental share repurchases," the analysts said.
Oppenheimer maintained its $189 price target and reiterated the stock as its "favorite idea in the homebuilder space."
Price: 125.68, Change: +1.82, Percent Change: +1.47
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