Toll Brothers Inc., the largest U.S. luxury-home builder, reported higher income than expected as it booked a deferred tax asset and home sales and orders increased.
Net income was $411.4 million, or $2.35 a share, in the three months ended Oct. 31, compared with $15 million, or 9 cents, a year earlier, Horsham, Pennsylvania-based Toll said today in a statement. The results included a net benefit of $350.7 million from adding the tax asset to its balance sheet. Net contracts jumped 70 percent.
The U.S. housing market is recovering after a six-year slump as low interest rates and rising consumer confidence spur demand for new homes. Construction spending climbed more than economists estimated in October as work on homes jumped to the highest level since November 2008, the Commerce Department reported yesterday.
“This was an exceptional earnings release, driven by orders, which will propel the earnings next year,” Stephen East, an analyst at International Strategy & Investment Group in Saint Charles, Missouri, wrote in a note to clients.
The average estimate of 19 analysts in a Bloomberg survey was for earnings of 24 cents a share. Excluding the one-time tax benefit, Toll’s earnings were about 30 cents a share, according to East, who has a hold rating on the stock.
Toll fell 1.8 percent to $31.86 at the close of New York trading. The shares have gained 56 percent this year, compared with a 77 percent advance for the 11-member Standard & Poor’s 1500 Homebuilding Index.
While orders are up, “we are disappointed in traffic,” Chief Executive Officer Douglas Yearley Jr. said during a conference call with analysts. “I think part of it is that the market is still in the early stages of recovery and we are very encouraged that, as traffic picks up, there’s a great opportunity to increase absorption to have some real pricing power.”
Revenue for the quarter totaled $632.8 million, up 48 percent from a year earlier, the company said. Net contracts signed climbed to 1,098 units from 644 a year earlier. The dollar value jumped to $684.1 million from $390 million, a 75 percent increase. The company’s backlog of properties under contract rose 70 percent to $1.67 billion.
The average price of homes delivered in the quarter was $582,000, up from $565,000 a year earlier.
For fiscal 2013, the company expects to deliver 3,600 to 4,400 homes at an average price of $595,000 to $630,000, according to the statement.
The homebuilder’s $350.7 million tax benefit included the reversal of deferred tax assets tied to losses during the housing crash.
Toll Brothers is a developer and builder of single-family homes, townhouses and high-rise communities in 20 states. More than half of its sales are on the East Coast from Washington to Boston.