Earnings Preview: Toll Brothers, Urban Outfitters

After U.S. markets closed on Friday, Palo Alto Networks reported better-than-expected earnings per share (EPS) and revenue that was just barely short of the consensus estimate. Analysts and investors breathed a big sigh of relief and sent shares up by around 16% in early trading on Monday.

There were no earnings reports due out before markets opened Monday morning.

After markets close on Monday and before they open on Tuesday, Baidu, Dick’s Sporting Goods, Lowe’s, Macy’s and Zoom Video are set to report results.

Later on Tuesday, there are two notable earnings reports due.

Toll Brothers

Shares of homebuilder Toll Brothers Inc. (NYSE: TOL) have soared by nearly 56% over the past 12 months, with nearly all of the gain coming in 2023. Since posting an all-time high a month ago, the stock price has fallen by about 8.4%.

Toll Brothers has beaten earnings estimates in every one of the past 12 quarters, and a subdued estimate for the July quarter has set the bar comfortably for still another beat. What the company has to say about its view of the second half of the year will be the most closely watched part of the earnings release.

Of 20 brokerages covering Toll Brothers, 11 have a Buy or Strong Buy rating and six have rated it at Hold. At a recent share price of around $76.40, the upside potential based on a median price target of $83.50 is 9.3%. At the high price target of $100.00, the upside potential is 30.1%.

When the company reports third-quarter 2023 results, analysts expect to see revenue of $2.4 billion, which would be down 4.4% sequentially and by 3.6% year over year. Adjusted EPS are forecast at $2.87, down 1.9% sequentially but up 22.5% year over year. For the full 2023 fiscal year ending in October, analysts expect EPS of $10.72, down 1.6%, on sales of $9.22 billion, down 10.3%.

Toll Brothers stock trades at 7.1 times expected 2023 EPS, 4.6 times estimated 2024 earnings of $10.07 and 7.9 times estimated 2025 earnings of $9.66 per share. Its 52-week trading range is $39.53 to $83.72. The company pays an annual dividend of $0.84 (yield of 1.1%). Total shareholder return for the past year was 58.16%.

Urban Outfitters

Specialty retailer Urban Outfitters Inc. (NASDAQ: URBN) has seen its share price surge by more than 55% over the past 12 months. The stock rose to a new 52-week high last week but has pulled back by about 5.7% since then on weak expectations for most retail stocks in the months ahead. Citigroup cut its rating on the stock from Buy to Neutral last week but raised its price target from $36 to $40, a signal that investor enthusiasm for the stock may have peaked.

Analysts are cautious on the stock, with 8 of 14 having Hold ratings and another five rating it at Buy or Strong Buy. At a share price of around $35.70, the implied upside based on a median price target of $39.00 is 9.2%. At the high target of $45.00, the implied gain is 26.1%.

Second-quarter fiscal 2024 revenue is forecast to come in at $1.25 billion, up 12.1% sequentially and 5.9% higher year over year. Analysts are forecasting EPS of $0.88, up 57.0% sequentially and by 40.1% year over year. For the full fiscal year ending in January, analysts expect EPS of $2.83, up 66.2%, on sales of $5.05 billion, up 5.4%.

Urban Outfitters stock trades at 12.7 times expected 2024 EPS, 11.9 times estimated 2025 earnings of $3.00 and 11.4 times estimated 2026 earnings of $3.13 per share. The 52-week trading range is $18.75 to $37.81. The company does not pay a dividend, and the total shareholder return for the past year was 55.12%.

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