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
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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
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
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
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
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
Ryland Group Inc.
Hovnanian Enterprises Inc.
). All the companies carry a Zacks Rank #2 (Buy).