Shaina Mishkin

Toll Brothers shares on Wednesday were on pace for their largest percentage decline since May, after the builder reported first-quarter earnings and sales that fell below analyst expectations.

It wasn't high housing costs or increased competition from more homes on the market that led to the miss, said the builder, which is best known for its luxury homes. "This was due primarily to impairments and a delay in the sale of a stabilized apartment property in one of our joint ventures," CEO Douglas C. Yearley, Jr. said in a statement. "Our core home-building operations met expectations in the quarter."

But that's not to say it's smooth sailing for home-building. Trends are mixed ahead of the typically busy spring homebuying season, executives said Wednesday on an investor conference call.

"While demand has remained healthy in many of our markets, and particularly in the higher end, affordability constraints and growing inventories in certain markets are pressuring sales, especially at the lower end," Yearley said.

Toll Brothers on Tuesday reported earnings of $1.75 a diluted share on $1.86 billion in revenue. Analysts had expected earnings of $2.04 a share on $1.91 billion in revenue, according to FactSet.

The builder's strongest markets were in the north and mid-Atlantic, "from Boston to Atlanta," in addition to Houston; Dallas; Boise, Ida.; Denver; Las Vegas; and the state of California, Yearley said on the call.

Toll Brothers' strongest markets are those without competition from other big builders, Yearley said. "That's one of the reasons the northeast, mid-Atlantic is so strong," he said.

The weakest markets were Jacksonville, Fla.; Tampa; San Antonio; Phoenix; Reno, Nev.; Salt Lake City, and Portland, Ore.

The stock was down about 7.7% on Wednesday and was on pace for its largest decrease since May 22, according to Dow Jones Market Data.

The builder delivered 1,991 homes and reported 2,307 homes under contract in the first quarter, falling short of the 2,060 deliveries and 2,452 new orders consensus expected.

It wasn't Tuesday's only gloomy news for builder investors. The National Association of Home Builders earlier in the day said builder confidence in February fell to its lowest level in five months. Concerns about tariffs and housing costs dimmed builders' view of demand in the next six months. "Policy uncertainty and cost factors created a reset for 2025 expectations" in the survey, Carl Harris, the trade group's chairman, said in a statement.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

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February 19, 2025 10:15 ET (15:15 GMT)

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