Earnings: Toll Brothers Posts Profit, But Lowers Outlook

Earnings: Toll Brothers |

Toll Brothers Posts Increased Profit, But Lowers Outlook

Toll Brothers Inc. (TOL), the leading U.S. luxury home builder, said on Tuesday that quarterly profit rose 3 percent on higher pricing, but lowered its earnings forecast for the fiscal year, a further sign of the slowing U.S. housing market.

Earnings increased to $175 million, or $1.06 per share, for the fiscal second quarter ended April 30, from $170.1 million, or $1.00 per share, a year earlier. Analysts, on average, had expected $1.03, according to Reuters Estimates.

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Shares rose 2 percent in pre-market trade.

While the economy remains healthy, the new-home market is beset by a glut of units created by investor and builder speculation and buyer cancellations, Chief Executive Robert Toll said.

"Demand, while obviously diminished, has not disappeared," he said in a statement. "We believe many customers currently feel a lack of urgency to purchase due to their uncertainty over the direction of home prices. This has contributed to keeping many potential buyers on the sidelines."

Toll's high-end customers are considered more knowledgeable about the housing market and have more discretion not to trade up from their existing homes.

Higher home prices and mortgage rates have taken their toll on the U.S. housing market, which began to soften last summer.

On May 5, Toll lowered its fiscal-year sales forecast to a range of between 9,000 and 9,700 homes from a previous range of 9,200 to 9,900.

The sales warning — the company's third since November — came after Toll saw the number of new-home orders in the quarter drop 32 percent, while the value of the contracts fell 29 percent. Orders fell 45 percent in Toll's biggest market — the states of Delaware, Maryland, Pennsylvania and Virginia.

Toll said it expected full-year earnings of $4.69 to $5.16 a share, down from a prior forecast of $4.77 to $5.26, excluding items. It expects results to suffer from higher material and labor costs and a bigger charge in the second quarter.

In the second quarter, the Horsham, Pennsylvania-based company wrote down $12 million, or 4 cents a share, from weakness in the metro Detroit market.

Analysts see full-year earnings of $4.93 a share, down from its prior average forecast of $4.98.

Toll stock was up 55 cents to $27.45 on the Inet electronic brokerage system.

Since hitting a high on July 20, Toll Brothers shares have fallen 54 percent. By comparison, the Dow Jones U.S. Home Construction Index has fallen 36 percent.

As previously disclosed, second-quarter revenue rose 17 percent to $1.44 billion. Analysts, on average, expected $1.45 billion.

Revenue from land sales totaled $2.1 million in the quarter, down from $9.8 million the year earlier.

Toll ended the quarter with a backlog of 8,739 homes under contract and awaiting construction, valued at $6.07 billion, up 3 percent.

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