Toll Brothers Q2 Results Surge, Top Estimates; Backs Forecast

(RTTNews) - Luxury home-builder Toll Brothers, Inc. (TOL) reported Wednesday that its second-quarter profit more-than doubled from last year as revenues were boosted by higher home deliveries and selling prices. Earnings and revenues topped analysts' estimates. Further, the company backed its forecast for fiscal 2014 home deliveries and margin.

Chief Executive Officer Douglas Yearley, Jr. said, "Our significant expansion over the past year in key California and Texas markets will be a major source of future growth. These are among the strongest housing markets in the U.S... Demand over the past year has been solid, although relatively flat, compared to the strong growth we initially experienced beginning in 2011, coming off the bottom of this housing cycle."

Net income for the second quarter grew to $65.22 million or $0.35 per share from $24.67 million or $0.14 per share last year. On average, 20 analysts polled by Thomson Reuters expected earnings of $0.26 per share for the quarter. Analysts' estimates typically exclude one-time items.

For the tri-monthly period, revenues surged 67 percent to $860.37 million from prior year's $516 million. Eighteen analysts estimated revenues of $827.83 million for the quarter.

Homebuilding deliveries of 1,218 units rose 36 percent from 894 units delivered a year ago. The average price of homes delivered was $706 thousand, higher than prior year's $577 thousand.

Net signed contracts grew 7 percent in dollars to $1.27 billion, while it slipped in units to 1,749 units from 1,753 units a year ago.

The average price of net signed contracts increased from last year, while the average price of new signed contracts declined due to some changes in geographic and product mix, but not from additional incentives, the company noted.

Backlog of $3.21 billion and 4,324 units climbed 27 percent in dollars and 18 percent in units from last year. At second-quarter end, the average price of homes in backlog also improved from last year.

Gross margin, excluding interest and write-downs, was 23.6 percent, compared to 23.3 percent in 2013, despite the negative impact of purchase accounting from Shapell Homes deliveries.

In the quarter, contracts from unconsolidated entities surged to $160 million from $16 million one year ago and backlog climbed to $190.7 million from $29.5 million one year ago, benefited by strong demand at two communities where the company is a 50 percent joint venture partner: Pierhouse at Brooklyn Bridge Park and Jupiter Country Club in Florida.

Looking ahead for fiscal 2014, Toll Brothers continues to expect to deliver between 5,100 and 5,850 homes and gross margin improvement of 175 to 200 basis points.

The company now projects average delivered price would be between $690 thousand and $720 thousand per home, an increase from $675 thousand at the bottom of the range in previous guidance.

On the NYSE, Toll Brothers stock gained 0.39 percent, and settled at $35.64 in Tuesday's regular trading. In after hours trading, stock gained 1.29 percent further, and traded at $36.10.