Toll Brothers Q1 Profit Surges On Sale Gain, Higher Volume, Prices

(RTTNews) - Luxury home-builder Toll Brothers, Inc. (TOL) reported Tuesday a significant increase in first-quarter profit, boosted by strong revenue growth with higher sales volumes and prices, as well as a gain from the sale of two shopping centers.

Citing the backlog and the pace of activity at its communities, the company currently estimates to deliver between 5,100 and 5,850 homes in fiscal 2014, a 4 percent decline from its previous top-of-the-range guidance, at an average price of between $675 thousand and $720 thousand per home. The company still expects to end the year with between 250 and 290 selling communities.

Chief Financial Officer Martin Connor stated, "Production, notably starts, have obviously been impacted by the severe winter weather in the Midwest, Mid-Atlantic and Northeast."

The company's first-quarter net income surged to $45.58 million or $0.25 per share from $4.43 million or $0.03 per share a year before. On average, 17 analysts polled by Thomson Reuters expected the company to report earnings of $0.18 per share for the quarter. Analysts' estimates typically exclude special items.

For the tri-monthly period, pre-tax income totaled $71.2 million, versus the previous year's $8.3 million.

The latest results included pre-tax inventory write-downs of $2 million and pre-tax income of $23.5 million related to the sale of two shopping centers in which Toll Brothers was a 50 percent joint venture partner, as well as $6.3 million of gains from land sales. The prior year's results included pre-tax inventory write-downs totaling $0.7 million.

Revenues grew 52 percent to $643.68 million from $424.60 million in the prior year quarter, whereas 17 analysts had consensus revenue estimate of $643.92 million.

Home building deliveries grew 24 percent to 928 units from 746 units a year earlier. The average price of homes delivered was $694 thousand, compared to $569 thousand last year.

In the quarter, net signed contracts rose 14 percent year-over-year to $701.7 million, while units fell 6 percent to 916 units.

Cancellation rate, i.e., current-quarter cancellations divided by current-quarter signed contracts, was 7 percent, compared to 6.2 percent in 2012.

First-quarter-end backlog of $2.69 billion and 3,667 units increased 45 percent and 31 percent, respectively. The company noted that an additional $105.3 million and 126 units were added to backlog upon completion of the Shapell acquisition early in the second quarter on February 4.

Gross margin for the period improved to 20.1 percent from 18.5 percent last year. Excluding write-downs and interest, gross margin improved to 24.4 percent from 23.4 percent in 2013. Operating margin improved to 4.9 percent from 0.1 percent a year ago.

The company said it ended its first quarter with 238 selling communities, compared to 225 at last year's first-quarter end.

CEO Douglas Yearley, Jr. added, "While it is still too early to draw conclusions about the Spring selling season, we remain optimistic based on solid affordability, attractive interest rates, growing pent-up demand and an industry still under-producing compared to both historical norms and current demographics."

Toll shares closed Monday's trading at $38.34, up $0.15 or 0.39 percent. In pre-market activity, shares gained $0.66 or 1.72 percent, and traded at $39.