Toll Brothers, Inc.
, (
TOL
) one of the leading luxury homebuilders in the US, reported
earnings of 35 cents per diluted share in the fourth quarter of
fiscal 2012, up significantly from the 9 cents earned in the
prior-year quarter. The year-over-year surge in earnings was
driven by strong sales and volume growth in the quarter. Reported
earnings also surpassed the Zacks Consensus Estimate of 23 cents
per diluted share.
Quarter Highlights
The company reported revenue of $632.8 million in the fourth
quarter of fiscal 2012, up 48% year over year, driven by volume
growth. Reported revenue exceeded the Zacks Consensus Estimate of
$558 million.
The number of homebuilding deliveries increased to 1,088 units,
up 44% year over year, attributable to a rise in demand and low
competition for luxury homes. The average delivery price was
$582,000 in the quarter, up 3.0% y/y, owing to a mix of high
priced products and price rise in some communities.
Net orders signed during the quarter were $684.1 million, up 75%
year over year. Contracts were signed for 1,098 units, up 70%.
Order growth was driven by the company's strong brand name and
attractive land positions. Highest order growth was registered in
the West and South regions.
The company's backlog totaled 2,569 homes as of October 31, 2012,
up 54% y/y. Potential housing revenues from backlog grew 70% y/y
to $1.67 billion, primarily attributable to hike in the prices of
backlogs.
In fourth quarter 2012, the company's cancellation rate
(current-quarter cancellations divided by current-quarter signed
contracts) declined to 4.6% compared with 7.9% in the prior-year
quarter.
The company's gross margin (excluding interest and write-downs)
grew 40 basis points to 24.6%, driven by improved prices and
volumes. Its reported pre-tax income (excluding write-downs) was
$60.7 million, up significantly from $15.3 million in the fourth
quarter of 2011.
Fiscal 2012
The company reported earnings of $2.86 per diluted share in
fiscal 2012, up from 24 cents in fiscal 2011. The year-over-year
surge in earnings was driven by strong revenue and order growth
throughout the year.
The company reported revenue of $1.88 billion, up 28% from the
prior-year level. The top line growth exceeded the company's
guidance range of $1.71 billion to $1.84 billion in fiscal 2012.
The company delivered 3,286 homes in fiscal 2012, up 26% year
over year and exceeds the guidance range of 3,000 and 3,200
homes. The company reported $2.56 billion of net order signed, up
59% year over year.
Outlook
Based on fiscal 2012 performance, Toll Brothers expects to
deliver 3,600 to 4,400 homes in fiscal 2013. The average price of
homes is expected to be in the range of $595,000 to $630,000. The
company expects 225 to 255 selling communities at the end of
fiscal 2013.
Our Take
We are positive about the strong overall growth witnessed by Toll
Brothers throughout fiscal 2012. We are encouraged by the
company's bullish growth projection for the upcoming quarters,
backed by the gradually recovering homebuilding market. We
believe that homebuilders like Toll Brothers and
Lennar Corporation
(
LEN
), who have significant land positions, broad geographic and
product diversity, and are in a better capital position, are
expected to benefit the most as market conditions improve.
Both Toll Brothers, Inc. and its peer Lennar Corporation carry a
Zacks #3 Rank (short-term 'Hold' rating). Longer-term, we are
maintaining our Neutral recommendation on both the
companies.
LENNAR CORP -A (LEN): Free Stock Analysis
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TOLL BROTHERS (TOL): Free Stock Analysis
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