TMHC vs TOL

Key Takeaways

• Both companies posted Q2 2024 revenue growth of roughly 6% YoY, with TMHC reporting $1.99 bn and TOL reporting $2.65 bn in home‑building revenue.
• TMHC achieved an adjusted home‑closings gross margin of 23.9% (Q2) versus TOL’s 28.2% adjusted home‑sales gross margin, reflecting TOL’s stronger spec‑home mix.
• Both firms raised full‑year guidance; TMHC now targets $10.6 bn–$11.0 bn FY 2024 revenue, while TOL expects ≈$14 bn FY 2024 earnings per share.
• Liquidity remains robust: TMHC holds ~$1.3 bn cash and $1.1 bn revolving credit capacity; TOL reports $1.0 bn cash and $1.7 bn undrawn revolving credit.
• Both companies continue aggressive share‑repurchase programs and dividend hikes, underscoring shareholder‑friendly capital allocation.

Introduction

Investors seeking exposure to the U.S. residential construction sector often compare the two industry leaders, TMHC (Taylor Morrison Home Corporation) and TOL (Toll Brothers, Inc.). Both firms operate nationwide, target mid‑to‑luxury buyers, and have reported solid Q2 2024 results amid a still‑tight housing supply and gradually easing mortgage rates. This comparison is relevant for growth‑oriented traders, income‑focused investors, and analysts weighing relative valuation, margin stability, and balance‑sheet strength.

TMHC Overview and Recent Performance

TMHC, a leading national land developer and homebuilder, announced its Q2 2024 earnings on July 24 2024. The company delivered 3,200 homes at an average price of $600 k, generating home‑closings revenue of $1.92 bn (down 4% YoY) and total revenue of $1.99 bn (down 3.4%). Adjusted home‑closings gross margin held at 23.9%, slightly below guidance but comparable to the prior year’s 24.2% margin. SG&A (selling, general and administrative expenses) as a percent of revenue rose modestly to 10.2%, reflecting higher marketing spend on new community openings. Net sales orders grew 3% YoY to 3,111, while the net backlog stood at 6,256 homes worth $4.20 bn. The company’s balance sheet showed $1.3 bn liquidity and a net home‑building debt‑to‑capital ratio of 22.8%, up from 15.4% a year earlier due to higher cash utilization for share buybacks ($105 m) and land acquisition ($611 m). Management raised FY 2024 revenue guidance to $10.6 bn–$11.0 bn and reaffirmed its 2024 EPS outlook of $1.86 – $2.12 (adjusted).

TOL Overview and Recent Performance

TOL, the nation’s leading builder of luxury homes, reported its FY 2024 Q2 results on May 21 2024. The company delivered 2,641 homes at an average price of $1.0 m, producing home‑sales revenue of $2.65 bn (up 6% YoY) and total revenue of $2.84 bn. Adjusted home‑sales gross margin reached 28.2%, outperforming guidance by 60 bps, while SG&A fell to 9.0% of revenue (70 bps better than forecast). Net signed contract value surged 29% YoY to $2.94 bn, and backlog declined modestly to $7.38 bn (down 12%). Cash holdings were $1.03 bn with $1.7 bn undrawn under a $1.9 bn revolving facility; net debt‑to‑capital stood at 18.7%. The firm repurchased $181 m of common stock and increased its quarterly dividend by 10%. Full‑year guidance was upgraded to FY 2024 earnings per share of approximately $14 and revenue near $10.23 bn, driven by expectations of 10,400‑10,800 deliveries at $960 k–$970 k average price.

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Head‑to‑Head Comparison

• Business Model: TMHC emphasizes a diversified portfolio of residential, rental, and financial‑services segments, while TOL focuses on luxury and upscale homes with a growing spec‑home component.
• Growth Drivers: Both benefit from low resale inventory and strong buyer demand. TMHC is expanding its land bank (≈80,677 lots) and increasing price‑point flexibility; TOL leverages spec‑home production (~54% of Q2 deliveries) to capture faster‑move‑in buyers.
• Margin Profile: Adjusted gross margins are 23.9% for TMHC vs. 28.2% for TOL. The gap reflects TOL’s higher price mix and efficient spec‑home cost structure, though TMHC maintains a tighter cost base with lower SG&A as a share of revenue.
• Risk Factors: TMHC faces exposure to financing‑service margins and land‑cost volatility; TOL is more sensitive to luxury‑buyer sentiment and potential spec‑home inventory adjustments.
• Liquidity & Leverage: Both have ample cash and revolving credit. TMHC shows a slightly higher net debt‑to‑capital (22.8%) versus TOL (18.7%), indicating modestly higher leverage at TMHC.
• Shareholder Returns: Both companies are active in share repurchases and have raised dividends in 2024, signalling confidence in free cash flow generation.

Tickeron AI Verdict

Based on the most recent data, Tickeron’s AI models currently assign a modest edge to TOL. The higher adjusted gross margin, stronger spec‑home pipeline, and upgraded FY 2024 earnings guidance suggest a higher probability of outperformance in the near term, especially if mortgage rates continue to ease. However, the advantage is not decisive; TMHC’s diversified land position and lower leverage provide a solid defensive profile. Hence, the AI verdict leans toward TOL as the preferable pick, with a probability weighting that reflects its superior margin trajectory while acknowledging the upside potential in TMHC if its land‑banking strategy translates into stronger price‑point expansion.

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