Toll Brothers (TOL) will likely exceed fiscal Q2 earnings per share consensus estimates despite market and mortgage rate volatility in April, Wedbush Securities said in a Thursday note.

The brokerage projected Q2 EPS of $3.10 versus Refinitiv's consensus estimate of $2.92. It also forecast $2.5 billion in revenue, down 11% year over year, with flat closings of 2,651 homes. Gross margin is expected to be 26%, up 20 basis points from a year ago and in line with consensus.

Absorption is seen declining to 2.4 orders per month from 2.6 a year earlier, according to the note.

The firm said it expects sequential gross margin improvement in Q2 and the second half, though it acknowledged that declining input costs may not fully offset the impact of mortgage rate buydowns.

"Upside risks include our F2Q25 forecast for <1% closing growth on 8% yoy community count growth estimate," Wedbush said.

It also pointed to commentary from Zillow (Z), which noted that strength in the high end of the housing market drove 500 basis points of growth in calendar Q1, while lower-price transactions were relatively flat year over year. Wedbush sees this as an incremental tailwind for its positive stance on Toll Brothers.

Wedbush reiterated its outperform rating on Toll Brothers with a price target of $175.

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