Toll Brothers, Inc.
) reported adjusted earnings of 7 cents per share in the second
quarter of fiscal 2013, in line with the Zacks Consensus
Estimate. Adjusted earnings exclude a one-time pre-tax gain
related to the previously reported settlement of derivative
litigation and the impact of inventory writedowns.
Adjusted earnings (excluding write downs) also declined 30% from
the prior-year quarter.
The company reported revenues of $516 million in the second
quarter of fiscal 2013, up 38% year over year, driven by volume
growth. However, reported revenues missed the Zacks Consensus
Estimate of $526 million by 1.9%.
The number of homebuilding deliveries increased to 894 units, up
33% year over year, attributable to a rise in demand and low
competition for luxury homes. The average price of homes
delivered was $577,000 in the quarter, up 3.6% year over year,
owing to shift in geographic and product mix.
Values of net orders signed during the quarter were $1.19
billion, up 57% year over year. Number of net orders signed was
1,753, up 36% year over year. Order growth was driven by strong
housing demand and increased pricing. The average price of net
signed contracts was $678,000 in the quarter, up 15.9% year over
year, as the company started raising prices in most of the
The company's backlog totaled 3,655 homes as of Apr 30, 2013, up
52% y/y. Potential housing revenues from backlog grew 69% year
over year to $2.53 billion, primarily attributable to hike in
prices of backlogs.
The company's gross margin (excluding interest and write-downs)
grew 10 basis points (bps) to 23.3%, driven by improved volumes.
However, gross margins declined 10 basis points sequentially due
to mix shift in deliveries from high margin communities to low
margin communities. Interestingly, the decline in margin was much
better than the company's anticipated decline of 100 basis
points, as the deliveries from lower margin communities were not
as big as expected.
Selling, general and administrative expenses were $79.6 million
in the quarter, up 16.5% year over year. As a percentage of
revenues, selling, general and administrative expenses improved
290 basis points to 15.4% on the back of increased revenues in
Toll Brothers expects to deliver 3,850 to 4,200 homes in fiscal
2013 compared to the prior guidance of 3,750 to 4,300 homes. The
company expects to deliver 25% more homes in the fourth quarter
than the third quarter of 2013. As such, the company expects 20%
more revenues in the fourth quarter 2013 than in the third
quarter 2013. The company expects average price of homes in the
range of $610,000 and $630,000 for full year 2013, tighter than
the prior guidance range of $595,000 to $630,000. The company
further expects average prices to be $25,000 higher in the third
quarter than the fourth quarter 2013.
The company expects gross margin to improve 275 bps sequentially
in third quarter 2013 on the back of price increase and delivery
of a high margin high-rise project in the quarter. For the fourth
quarter of 2013, the company expects gross margin to improve 200
bps over the second quarter level. For full year 2013,
margin is expected to improve 80 basis points compared with the
prior expectation of a 50 to 60 basis points improvement.
The company continues to expect 225 to 255 selling communities at
the end of fiscal 2013. The company expects community count to
grow thereafter in 2014.
Toll Brothers carries a Zacks Rank #3 (Hold).
Other stocks in the homebuilding sector that are performing
well and deserve a mention include
D. R. Horton Inc.
Ryland Group Inc.
). While D.R Horton and Ryland carry a Zacks Rank #1 (Strong
Buy), KB Home carries a Zacks Rank #2 (Buy).
D R HORTON INC (DHI): Free Stock Analysis
KB HOME (KBH): Free Stock Analysis Report
RYLAND GRP INC (RYL): Free Stock Analysis
TOLL BROTHERS (TOL): Free Stock Analysis
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