Toll Brothers Beats 3Q Earnings Ests - Analyst Blog
Toll Brothers, Inc.
) reported adjusted earnings of 38 cents per share in the third
quarter of fiscal 2013, surpassing the Zacks Consensus Estimate
of 27 cents by 40.7%. Adjusted earnings increased 46.2% from the
The company reported revenues of $689.2 million in the third quarter of fiscal 2013, up 24.3% year over year, driven by volume growth. However, reported revenues missed the Zacks Consensus Estimate of $703 million by 2.0%.
The number of homebuilding deliveries increased to 1,059 units, up 10% year over year, attributable to a rise in demand and low competition for luxury homes. The average price of homes delivered was $651,000 in the quarter, up 13% year over year.
However, excluding 16 higher-priced deliveries at the
Touraine, the average price still increased 6.3% year over year
in the quarter. The Touraine is an ultra luxury residential
building with 21 units, located at Manhattan's Upper East Side in
New York City. It is one of the high end projects of Toll
The number of net orders signed was 1,405, up 26% year over year. Value of net orders signed during the quarter was $992.6 million, up 47% year over year. Order growth was driven by strong housing demand and increased pricing.
The company believes that the recent spike in interest/mortgage rates has not hurt the company's results as its cancellation rate for the quarter was 4.6%,, still below the historical average of 7%. Management attributed this to the fact that the company caters to the luxury market, wherein homebuyers have high purchasing power.
The company's backlog totaled 4,001 homes as of Jul 31, 2013, up 56% year over year. Potential housing revenues from backlog grew 75% year over year to $2.84 billion, primarily attributable to hike in prices of backlogs.
The company's gross margin (excluding interest and write-downs) grew 70 basis points (bps) to 25.1%, driven by improved pricing of non-high rise buildings. Gross margins improved 180 bps sequentially, much lower than the company' expected sequential increase of 275 bps. Operating margin improved 230 bps to 8.0% in the quarter.
Selling, general and administrative expenses were $88.9 million in the quarter, up 18.7% year over year, due to increased expenses associated with higher volumes. As a percentage of revenues however, selling, general and administrative expenses improved 60 basis points to 12.9% on the back of increased revenues in the quarter.
Fourth Quarter 2013 Outlook
Toll Brothers expects to deliver 1,225 to 1,425 homes in the fourth quarter of fiscal 2013. The company expects average price of homes in the range of $675,000 and $695,000 in the fourth quarter.
Fiscal 2013 Outlook
Toll Brothers tightened its home closing guidance to 3,925 and 4,125 homes compared to the prior guidance of 3,850 to 4,200 homes in fiscal 2013. Total home sale revenue for fiscal 2013 is expected in the range of $2.46 billion and $2.62 billion. 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 expects community count to remain at 225 at the end of fiscal 2013, lower than the prior expected range of 225 to 255. The company expects community count to grow thereafter in 2014 by 10% to 15%.
Toll Brothers carries a Zacks Rank #3 (Hold).
Other stocks in the homebuilding sector that are performing well and deserve a mention include Meritage Homes Corporation ( MTH ), Ryland Group Inc. ( RYL ) and Hovnanian Enterprises Inc. ( HOV ). All the companies carry a Zacks Rank #2 (Buy).
HOVNANIAN ENTRP (HOV): Free Stock Analysis Report
MERITAGE HOMES (MTH): Free Stock Analysis Report
RYLAND GRP INC (RYL): Free Stock Analysis Report
TOLL BROTHERS (TOL): Free Stock Analysis Report
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