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Toll Brothers Q4 results smash estimates as U.S. housing market recovers

Toll Brothers Q4 results smash estimates as U.S. housing market recovers

 

Luxury homebuilder Toll Brothers (NYSE:TOL) Tuesday said both its profit and revenues rose sharply in its fiscal fourth quarter, as a rise in consumer confidence spurred buyers to return to the housing market.

Toll Brothers’ shares rose over five per cent on the news in premarket hours, trading at $34.07.

For the three months that ended October 31, the homebuilder reported net income of $411.4 million or $2.35 per share, compared to $15.0 million, or nine cents per share, in the year-ago quarter. 

The company noted that net income in the latest period included a net tax benefit of $350.7 million, pre-tax inventory write-downs of $1.5 million and $0.7 million of cash recoveries of prior joint venture write-offs.

That compared to pre-tax inventory write-downs of $18.2 million and a $0.4 million pre-tax loss from the early buyback of debt a year earlier.

The homebuilder’s $350.7 million tax benefit in the latest quarter included the reversal of deferred tax assets tied to losses during the housing crash.

Revenue rose 48 per cent to $632.8 million, compared to total revenues of $427.8 million a year earlier.

Analysts, according to Thomson Reuters, expected per share earnings of 23 cents on revenue of $566.74 million.

“Pent-up demand, rising home prices, low interest rates, and improving consumer confidence motivated buyers to return to the housing market in 2012,” said CEO Douglas C. Yearley, Jr.

“As household formations accelerated and unsold home inventories dropped to record lows, the industry took further steps toward a sustained housing recovery. We enjoyed resurgent activity across all of our product lines and in most of our geographic regions. 

“The momentum that began in our first quarter of 2012 built throughout the year.”

Yearley said sequentially, over the four quarters of 2012, the value of net signed contracts rose 45, 51, 66 and 75 per cent compared to the same four quarters a year earlier. He added that Toll Brothers believes publicly traded homebuilding companies are growing market share.

“As the only national home building company focused on the luxury market, we are particularly well positioned,” he asserted. 

“Our financial strength gives us a competitive advantage over the small and mid-sized private builders in our luxury niche whose access to capital and land remains constricted.”

Toll Brothers’ target market includes high-income earners who typically make more than $100,000 a year, can afford to make a down payment of as much as 30 per cent on a home, have good credit and an unemployment rate about half that of everyone else.

Home deliveries rose 44 per cent in units, while net signed contracts rose 70 per cent to 1,098 units. The average price per unit of net contracts signed was $582,000, compared to $565,000 in the year-ago fourth quarter.

The company said that net signed contracts of 4.86 units per community were the highest for any fourth quarter since 2005.

Backlog climbed 70 per cent to $1.67 billion and 2,569 units, while Toll Brothers' cancellation rate was 4.6 per cent, way down from 7.9 per cent a year earlier. 

Gross margin was 24 per cent, compared to 23.3 per cent a year ago. 

Toll Brothers said that with its current backlog and “the lowest cancellation rate” in its industry, it believes it will deliver between 3,600 and 4,400 homes in full-year 2013 at an average price of between $595,000 and $630,000 per home. 

The company expects to end full-year 2013 with between 225 and 255 selling communities.

 

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