Toll Brothers Inc TOL reported its F2Q16 EPS ahead of expectations. Deutsche Bank’s Nishu Sood maintained a Buy rating for the company, with a price target of $41. The analyst said that the results should alleviate concerns of a slowdown at the high-end of the market and help build confidence in Toll's ability to achieve margin stability and moderate volume growth in FY16.
Housing Market Recovery
“Volatility in financial markets, select anecdotal evidence and some turmoil in related sectors has fed investor concerns that the mid- to high-end of the housing market faces an imminent slowdown,” analyst Nishu Sood wrote. He added that these fears were unfounded and expects this segment of the housing market to continue to recover.
While individual factors, such as a pullback in the foreign buyer, could impact some markets, the factors that are expected to drive a continued housing recovery, such as jobs, rates and lending standards, would also drive continued growth in the mid- to high-end of the market, Sood commented.
Although growth rates could be below prospective growth rates in the low-end of the market, Toll Brothers is likely to be able to drive volume growth, “especially with robust community count growth,” the analyst added.
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