Luxury home-builder Toll Brothers Inc. (TOL) reported Wednesday a higher profit for its third quarter as revenues benefited with increased home deliveries and higher selling prices. Looking ahead, the company lifted the lower end of its full-year delivery forecast.
Chief Executive Officer Douglas Yearley said, "We are enjoying the most sustained demand we've experienced in over five years. The pace of our contract growth has far exceeded the national housing data as we are gaining market share...we are facing limited competition from the capital-constrained small and mid-sized private builders who are our primary competitors."
According to the company, the housing recovery is being driven by pent-up demand, very low interest rates and attractively priced homes.
For the third quarter, net income was $61.6 million or $0.36 per share higher than last year's $42.1 million or $0.25 per share.
The latest quarter results mainly included lower pre-tax inventory write-downs and lower net tax benefit than last year.
On average, 20 analysts polled by Thomson Reuters expected the company to earn $0.18 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenues improved 41 percent to $554.32 million from $394.31 million last year, while analysts had a consensus revenue estimate of $508.98 million.
Homebuilding deliveries were 963 units, 39 percent higher than the last year's 693 units. The average price of homes delivered was $576 thousand, higher than $569 thousand in the previous year.
Net signed contracts climbed 66 percent in dollars to $674.4 million and 57 percent in units to 1,119 units. The average price per unit of net contracts signed also grew from last year.
Operating margin improved 830 basis points to 5.7 percent. Chief Financial Officer Martin Connor stated that higher sales and settlement volumes are improving efficiencies and reducing expenses as a percent of revenues.
Third-quarter-end backlog was $1.62 billion and 2,559 units, a growth of 59 percent in dollars and 44 percent in units from last year.
Going ahead, the company currently expects to deliver between 800 and 1,000 homes in the fourth quarter at an average price of between $570 thousand and $590 thousand per home.
While announcing second-quarter results back in May, the company had said that it expects delivering approximately 10 percent more homes in the fourth quarter sequentially and that the average delivered price for the next two quarters will be between $560 thousand and $580 thousand per home.
Toll added that three weeks into fourth quarter, non-binding reservation deposits, i.e., a precursor to future contracts, are up 59 percent
For fiscal 2012, the company now expects total home sale revenue between $1.71 billion and $1.84 billion and total deliveries between 3,000 and 3,200 homes. Previously, the company expected to deliver between 2,700 and 3,200 homes for the year. In the prior year, home sale revenue was $1.48 billion and total deliveries were 2,611 homes.
Executive Chairman Robert Toll stated, "...we do, however, remain cautious in our optimism as we believe consumer confidence remains fragile and subject to the impact of negative economic and political headlines."
Toll Brothers' shares closed Tuesday's trading at $31.81, down 0.50 percent. In pre-market activity, shares gained $0.44 or 1.38 percent, and are currently trading at $32.25.
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