) to overweight from neutral.
Analyst Michael Rehaut says Toll Brothers is favorably positioned relative to peers; therefore, it's a more defensive name in a rising interest-rate environment. He notes three factors enhance Toll Brothers' earnings per share visibility: its niche status as a luxury home builder, its order conversion cycle, and its above-peers backlog growth for the last two quarters.
Rehaut has a $3.35 fiscal 2003 (Oct.) earnings per share estimate. He raised the $3.10 fiscal 2004 earnings per share estimate to $3.55. He says he's keeping his negative stance on builders, given the view that slowing fundamentals and expensive valuations create an unfavorable risk/reward dynamic.