Tags: Toll | Brothers | earnings | homes

Toll Brothers' Profit Falls but Tops Wall Street's View

Tuesday, 06 Dec 2011 12:32 PM

Toll Brothers Inc.'s fiscal fourth-quarter net income slid 70 percent, partly because last year's quarter was helped by a large tax benefit.

Still, the performance topped analysts' expectations, and the luxury homebuilder's revenue climbed as home deliveries and net signed contracts increased. Toll Brothers also benefited from fewer cancellations.

Its shares rose 18 cents to $20.91 in morning trading Tuesday. They are up almost 60 percent from their 52-week low of $13.16 set in early October. Its shares peaked for the year at $22.42 in mid-February.

Homebuilders are a bellwether for the housing market and the economy. While new homes represent less than one-fifth of the total housing market, they have an outsize impact on the economy. Each new home creates an average of three jobs and generates $90,000 in taxes, according to the National Association of Home Builders.

Executive Chairman Robert Toll said that the company believes its prospective customers have the ability to buy but that a lack of confidence in the U.S. economy is holding people back from making purchases.

Horsham, Pa.-based Toll Brothers reported net income of $15 million, or 9 cents per share, for the three months ended Oct. 31, down from $50.5 million, or 30 cents per share, a year earlier. Last year's results included a $59.9 million tax benefit.

Analysts surveyed by FactSet expected earnings of 5 cents per share.

For the quarter, revenue rose 6 percent to $427.8 million. That beat Wall Street's $424.3 million estimate.

Fourth-quarter home deliveries climbed 8 percent to 757 units. Signed contracts increased 15 percent to 644 units.

Toll Brothers said the average price of its quarterly signed contracts was $606,000, up from $565,000 a year ago.

The homebuilder's contract cancellation rate came in at about 7.9 percent, down from 8.8 percent in the prior-year period.

For the full year, Toll Brothers earned $39.8 million, or 24 cents per share, versus a net loss of $3.4 million, or 2 cents per share, in the previous year.

Annual revenue dipped 1 percent to $1.48 billion from $1.49 billion.

Toll Brothers predicts that it will deliver between 2,400 and 3,200 homes in fiscal 2012 at an average price of $550,000 to $575,000 per home.

Its main competition is smaller, private builders. As a result, it has gained a bigger slice of the market during the housing downturn as those builders languished.

Chief Financial Officer Martin Connor said in a statement that Toll Brothers can improve its earnings by boosting its community count, but that "significant margin improvement will only be achieved once we see the return of some urgency to the market, which should lead to increased sales prices and paces."

Last month Toll Brothers acquired privately held Seattle-area builder CamWest Development, marking its first expansion into a new state since before the housing crash. Toll Brothers said the acquisition will add to its earnings in fiscal year 2012, which began in November.

Toll Brothers has operations in 20 states and is the nation's largest builder of luxury homes. It also buys distressed real estate portfolios through a subsidiary.

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Toll Brothers Inc.'s fiscal fourth-quarter net income slid 70 percent, partly because last year's quarter was helped by a large tax benefit. Still, the performance topped analysts' expectations, and the luxury homebuilder's revenue climbed as home deliveries and net signed...
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Tuesday, 06 Dec 2011 12:32 PM
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