Toll Brothers Profit Tops Estimates as Home Orders Jump
Toll Brothers Inc. (TOL), the largest U.S. luxury-home builder, reported a second-quarter profit that beat estimates as orders jumped in an improving housing market.
Net income was $16.9 million, or 10 cents a share, for the three months through April, compared with a loss of $20.8 million, or 12 cents, a year earlier, the company said today in a statement. The average estimate of 18 analysts in a Bloomberg survey was for a profit of 3 cents a share.
The U.S. housing market is stabilizing as rising employment and record-low mortgage rates lure buyers. Toll Brothers, based in Horsham, Pennsylvania, benefits from increased demand for move-up homes and a wealthier customer base with access to cash and credit. The company said quarterly orders surged 47 percent from a year earlier in a “robust” spring selling season.
“Orders were the belle of the ball,” Stephen East, an analyst with International Strategy & Investment Group LLC, wrote in a note today. “This sits distinctly at the top of our rosy expectation.”
U.S. purchases of new homes in April increased 3.3 percent from the previous month to an annual pace of 343,000, the Commerce Department said today. The rate was 316,000 a year earlier.
The improving real estate market is enabling buyers to sell starter houses and move up to larger properties, including those offered by Toll. Sales of previously owned homes rose 3.4 percent in April to a 4.62 million annual rate, the first increase in three months, the National Association of Realtors said yesterday in Washington.
Toll’s homebuilding revenue for the quarter increased 17 percent from a year earlier to $373.7 million. Closings rose 14 percent to 671 homes.
Orders climbed to 1,290 homes from 879 a year earlier. The company’s backlog, an indication of future sales, rose 37 percent to 2,403 homes. By value, the backlog jumped 49 percent to $1.5 billion.
“It appears that the housing market has moved into a new and stronger phase of recovery,” Chief Executive Officer Douglas Yearley said in the statement. “The spring selling season has been the most robust and sustained since the downturn began.”
The average price of a Toll Brothers home under contract was $585,000 in the second quarter. The company said the average price of closings in the next two quarters will be between $560,000 and $580,000. The company expects to deliver 2,700 to 3,200 homes in fiscal 2012, with closings in the fourth quarter about 10 percent higher than in the third.
Toll rose 2.7 percent to $27.75 today in New York. The shares have gained 36 percent this year, matching the advance in the 11-member Standard & Poor’s 1500 Homebuilding index.
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