Toll Brothers rises to 5-year high after profit beats estimates
Aug. 22 (Bloomberg) -- Toll Brothers Inc., the largest U.S. luxury-home builder, reported fiscal third-quarter earnings that beat analysts’ estimates as revenue increased.
Net income was $61.6 million, or 36 cents a share, for the three months ended July 31, compared with $42.1 million, or 25 cents, a year earlier, the Horsham, Pennsylvania-based company said today in a statement. The average estimate of 18 analysts in a Bloomberg survey was for earnings of 18 cents a share. The year-earlier results included a $38.2 million tax benefit.
The U.S. new-home market is beginning to recover as historically low mortgage rates and a tight inventory of existing houses push more people to consider buying from builders. The improving market is enabling homeowners to sell starter houses and move up to larger properties, such as those offered by Toll, which caters to customers with better access to cash and credit than first-time buyers usually have.
“Housing is on the mend,” Executive Chairman Robert I. Toll said in the statement. “We do, however, remain cautious in our optimism as we believe consumer confidence remains fragile and subject to the impact of negative economic and political headlines.”
Revenue rose to $554.3 million in the third quarter from $394.3 million a year earlier, Toll said. Pretax income increased more than 10-fold to $43 million. The company delivered 963 homes to buyers, a 39 percent increase.
Low Leverage
“Toll Brothers is one of the highest-quality homebuilders in the sector,” Vincent Foley and Cedric Morris, credit analysts with Barclays Plc, wrote in an Aug. 20 note. “Its management team is strong, its balance sheet is relatively flush with cash, its leverage is low and its operations should remain profitable.”
The average price of the homes Toll delivered in the third quarter increased to $576,000 from $557,000 in the second quarter. The gross margin, which excludes interest and writedowns, widened to 24.4 percent from 23.4 percent a year earlier.
U.S. housing construction permits in July rose to an annual pace of 812,000, the most since 2008, the Commerce Department reported Aug. 16. Orders for 13 publicly traded homebuilders increased to 29,362 in the second quarter, up 17 percent from a year earlier, according to data compiled by Bloomberg Industries.
National Sales
The National Association of Realtors is expected to report today that sales of previously owned homes rose to an annual pace of 4.51 million in July, the median of 73 estimates in a Bloomberg survey, from 4.37 million in June.
The Commerce Department releases July new-home sales data tomorrow. Sales are expected to rise to an annual pace of 365,000, the median of 72 estimates in a Bloomberg survey, from 350,000 in June.
Toll released its results before the start of regular U.S. trading. It fell 0.5 percent to $31.81 in New York yesterday. The shares are up 56 percent this year, giving the company a market value of $5.3 billion.
(Toll Brothers will hold a conference call at 2 p.m. New York time. See TOL US <Equity> EVT <GO>.)
