Toll Brothers Earnings, Revenue Solidly Beat Estimates

Toll Brothers Inc. (NYSE: TOL) reported third fiscal quarter earnings per share (EPS) of $0.36 on $543 million in sales before markets opened this morning. In the same period a year ago, the country’s largest builder of luxury homes reported EPS of $0.25 on revenue of $394.3 million. Third-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.18 and $509 million in revenue.

Included in earnings are a pretax inventory write-down of $3.1 million and a net tax benefit of $18.7 million. In the same period last year, Toll Brothers wrote down $16.8 million in inventory and had a pretax loss of $3.4 million on early debt repurchases and a net tax benefit of $38.2 million.

The company’s CEO sounded almost euphoric:

We are enjoying the most sustained demand we’ve experienced in over five years. In the past three quarters, the values of our signed contracts were up 45%, 51% and now 66% compared to FY 2011. Three weeks into our fourth quarter, our non-binding reservation deposits (a precursor to future contracts) are up 59% compared to the same period in FY 2011.

He also had this to say about the housing market in general:

We believe the housing recovery is being driven by pent-up demand, very low interest rates and attractively priced homes. Customers who have postponed buying for a number of years are moving into the market. With an industry-wide shortage of inventory in many markets, we are enjoying some pricing power.

Concerning fourth fiscal quarter guidance, the company expects to deliver 800 to 1,000 homes at an average price of $570,000 to $590,000. If that expectation is met, full-year revenue will reach $1.71 to $1.84 billion and total home deliveries of 3,000 to 3,200, up from $1.48 billion and 2,611 homes delivered in fiscal year 2011. The company offered no estimate for earnings, but the consensus estimates call for EPS of $0.23 in the fourth quarter and $0.47 for the full year.

Toll Brothers’ shares are up about 2.5% in premarket trading at $31.81. The current 52-week range is $13.16 to $32.55. Thomson Reuters had a consensus analyst price target of $31.09 before today’s results were announced. Toll Brothers’ price target is due for some adjustment.

Paul Ausick