Toll Brothers (TOL) recently reported a lousy FQ2 as the housing crisis continued. And Deutsche isn’t seeing a TOL recovery any time soon:
Long on cash, but short on flexibility in responding to the downturn Toll Brothers’ continues to do an admirable job of holding land spend, cutting expenses and building cash. Management has set a long timer in terms of living through the downturn. Compared to other builders however, Toll has less flexibility in setting itself up for eventual recovery. Its land positions are longer and less developed, and brand protection necessitates more of a wait and see approach on pricing. Unfortunately, this means a more protracted period of impairments and declining profitability; accordingly we maintain our Hold rating.
Deutsche’s price target on Toll Brothers remains at $20.
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