For the three months through July, the company reported net signed contracts for 1,324 homes worth $949.1 million, a decrease of 6 percent in units and 4 percent in dollars from a year earlier. Horsham, Pennsylvania-based Toll also said it expects to deliver a maximum of 5,500 homes in the full year, down from the previous quarter’s projection of as many as 5,850.
“Orders don’t appear to be tracking, suggesting a lack of buyer urgency,” Adam Rudiger, an analyst with Wells Fargo & Co. who has the equivalent of a hold rating on the shares, said in a note to clients today. “Overall, we see Toll as a well-positioned builder, but currently it just appears to us that it’s a waiting game on better demand.”
Sales of U.S. new homes have been choppy as the economy and housing market struggle to recover from the 2008 financial crisis. Purchases fell 2.4 percent in July from the previous month to an annual pace of 412,000, according to the Commerce Department. Sales plunged 31 percent in the Northeast, an area that accounts for almost half of Toll’s market.
Toll shares fell 4.7 percent to $33.95 in New York, the most since July 24 and the worst performance in the 11-company Standard & Poor’s Supercomposite Homebuilding Index, which declined 3 percent.
Rather than a smooth housing recovery, there will be “choppy seas and a sloppy boat ride,” Chairman Robert Toll said on a conference call today. “But we’re not going back. We’re inching forward.”
Net income for the fiscal third quarter rose to $97.7 million, or 53 cents a share, from $46.6 million, or 26 cents, a year earlier, Toll said today in a statement. Revenue rose to $1.06 billion from $689.2 million a year earlier. The average price of homes sold in the quarter climbed to $732,000 compared with $651,000.
“We thought the pent-up demand would continue to build and ’14 would be a significantly better year than ’13,” Toll Chief Executive Officer Douglas Yearley Jr. said on the call. “So are we disappointed in flat or slightly negative order growth? The honest answer is yes. But are we happy with the way we generated strong margins off of our business? That answer is yes.”
Toll’s gross margin excluding interest and writedowns widened to 26.8 percent in the quarter from 25.1 percent a year earlier. The full-year gross margin will improve by 185 to 200 basis points compared with fiscal 2013, Toll said. It previously predicted an increase of as little as 175 basis points.
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