Toll Brothers 3Q Profit Rises as Order Climb
Toll Brothers, a home building company active in 20 states, buoyed Wall Street on Wednesday with a quarterly report that also gave the housing industry some much needed hope. The Pennsylvania-based home builder said its third quarter income rose 46 percent, nearly twice what analysts had predicted.
Toll Brothers builds homes in the high middle and luxury price ranges so has not been battered quite as much by competition from foreclosed homes as have builders in the entry level range. Its target market is households which are usually moving up from other homes and that the AP characterizes as making more than $100,000 a year, with good credit, high employment rates and generally able to afford down payments of 30 percent or more.
The company reported net income during FY 2012's third quarter of $61.6 million or $0.36 per share compared to $42.1 million or $0.25 per share in the third quarter of 2011. Analysts' consensus estimate was 18 cents per share. Net income included pre-tax inventory write-downs of $3.1 million and a net tax benefit of $18.7 million, compared to pre-tax inventory write-downs of $16.8 million, a $3.4 million pre-tax loss from early repurchase of debt and a net tax benefit of $38.2 million in FY 2011's third quarter.
The company delivered 963 units of housing during the quarter, a 39 percent increase over the third quarter of 2011. The average price of homes delivered was $576,000, compared to $557,000 in FY 2012's second quarter and $569,000 in FY 2011's third quarter.
Douglas C. Yearley, chief executive officer, stated: "We are enjoying the most sustained demand we've experienced in over five years. In the past three quarters, the values of our signed contracts were up 45%, 51% and now 66% compared to FY 2011. Three weeks into our fourth quarter, our non-binding reservation deposits (a precursor to future contracts) are up 59% compared to the same period in FY 2011.
"We believe the housing recovery is being driven by pent-up demand, very low interest rates and attractively priced homes. Customers who have postponed buying for a number of years are moving into the market. With an industry-wide shortage of inventory in many markets, we are enjoying some pricing power.
With the usual SEC required caveat on forward looking information, the company said it expected to deliver between 800 and 1,000 homes in the fourth quarter at an average price of between $570,000 and $590,000 per home which would, if achieved, produce total home sale revenue for FY 2012 of $1.71 billion to $1.84 billion and total deliveries of between 3,000 and 3,200 homes. This compares to $1.48 billion and 2,611 homes in FY 2011.
Toll Brothers stock was up $1.43 or 4.31 percent in early trading and its financial news carried most other home building stocks higher as well. Stocks of Beazer Homes, DR Horton, KB Homes and the Ryland Group were all up 4.3 to 4.86 percent.