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Toll Tops Estimates as Move-up Buyers Lift Revenue

Toll Brothers Inc., the largest U.S. luxury-home builder, reported fiscal first-quarter earnings that beat analysts’ estimates as move-up buyers continued to make purchases at a time when the housing market is cooling.

Net income for the three months through Jan. 31 was $45.6 million, or 25 cents a share, compared with $4.4 million, or 3 cents, a year earlier, the Horsham, Pennsylvania-based company said today in a statement. The average estimate of 10 analysts was for earnings of 17 cents a share, according to data compiled by Bloomberg.

Buyer demand remains strong for higher-cost homes and Toll Brothers has been able to widen profits by controlling costs, according to Robert Wetenhall, a New York-based analyst with RBC Capital Markets who expected earnings of 16 cents a share.

“Continued strength in the luxury segment of the housing market and better financial performance represent potential catalysts for share-price appreciation,” Wetenhall, who rates Toll shares the equivalent of hold, said yesterday in a note to investors.

New-home sales in January probably fell to an annual pace of 400,000, the median of 81 estimates compiled by Bloomberg. That would be the third consecutive monthly decline. The Commerce Department reports the new-home sales data tomorrow.

Toll’s first-quarter revenue was $643.7 million, up from $424.6 million a year earlier. The average price of homes sold was $694,000 compared with $569,000.

Contracts Down

Signed contracts fell 6 percent to 916 homes. Severe weather hurt business in the Northeast, Mid-Atlantic and the Midwest, where Toll sells about half of its homes, according to the statement.

Citing the cold weather in key markets, Toll lowered the top end of its forecast for the number of homes it will deliver this fiscal year. The company said it expects to deliver 5,100 to 5,850 houses, down from its previous projection of 5,100 to 6,100.

“This was the coldest January since 2001 and one of the worst winters since we entered the business,” Executive Chairman Robert Toll said in the statement. “Although the weather will result in some delays and some additional but not major costs, it should not result in lost sales or deliveries.”

Toll fell 1.6 percent to $37.74 at 9:51 a.m. in New York. The shares gained 11 percent in the 12 months through yesterday, compared with an 8.9 percent increase in the 11-company Standard & Poor’s Supercomposite Homebuilding Index.

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