1. Setup Recap
Toll Brothers reported after the close on Monday, Dec. 8.
The pre-earnings call was for a down gap (~-4%) with medium confidence (60%), expecting an in-line quarter with in-line forward framing.
2. What Actually Happened
It was “revenue ok, EPS miss, outlook cautious”:
- EPS: $4.58 vs $4.88 expected (miss).
- Revenue: ~$3.4B vs ~$3.3B expected (beat).
- Outlook: management framed FY2026 as “choppy,” and the midpoint EPS outlook was cited as below analyst expectations.
3. Price Action
- Prior close (Mon): $136.20
- Open (Tue): $129.85 → -4.7% gap
- Close (Tue): $132.90 → -2.4% close-to-close
No reversal — it stayed red versus the prior close, though it did reclaim some ground off the open.
4. Attribution: Why It Moved
The stock traded the forward setup:
- Revenue beating wasn’t enough because EPS missed.
- The cautious framing for 2026 (and midpoint EPS outlook below expectations) kept pressure on the multiple.
5. What Worked / What Didn’t
What worked:
- Directional call (down) was right on both gap and close.
What didn’t:
- Treating guidance as likely in-line understated the risk that outlook language would become the headline.
6. Lessons & Playbook Updates
- For homebuilders, outlook language can dominate the post-print tape when the macro is already noisy.
- A revenue beat can be “nice,” but if EPS misses and 2026 commentary turns cautious, expect sellers to show up quickly.
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