Toll Brothers Q3 Profit Climbs, Matches View; Tightens FY16 Revenue Forecast

(RTTNews) - Luxury home builder Toll Brothers, Inc. (TOL) reported Tuesday higher profit in its third quarter, boosted by increased deliveries and selling prices. Earnings per share matched analysts' estimates, while revenues beat their view. For the fourth quarter, the company sees sequentially higher deliveries. Looking ahead, for fiscal 2016, the company tightened its revenue view, while trimmed margin forecast.

Douglas Yearley, Jr., chief executive officer, stated: "Our strategy to be the premiere brand in luxury home building, and to provide a wide variety of product lines, price points and geographic locations, continues to pay off. ... Each region contributed significantly."

For the third quarter, net income climbed 58 percent to $105.48 million or $0.61 per share from last year's $66.75 million or $0.36 per share. On average, 15 analysts polled by Thomson Reuters expected earnings of $0.61 per share for the quarter. Analysts' estimates typically exclude special items.

Pre-tax income of $163.7 million increased 52 percent. The latest results included impairments of $3.7 million, compared to impairments of $18.0 million a year ago.

Revenues of $1.27 billion grew 24 percent from $1.03 billion last year. Analysts were looking for revenues of $1.25 billion for the quarter.

Home building deliveries were 1,507 units, up 6 percent in units. The average price of homes delivered was $843,000, compared to $724,000 a year earlier.

In the quarter, net signed contracts of $1.45 billion and 1,748 units rose 18 percent in dollars and units from the previous year. The average price of net signed contracts was $831,000, lower than $834,000 a year ago.

Backlog rose 19 percent in dollars to $4.37 billion and 17 percent in units to 5,181 units.

Adjusted gross margin was 25.3 percent, compared to 25.2 percent in 2015. Income from operations was 11.3 percent of revenue, higher than prior year's 8.5 percent.

Looking ahead, for the fourth quarter, Toll Brothers projects deliveries between 2,025 and 2,325 units with an average price of between $815,000 and $835,000.

For fiscal 2016, the company now expects revenues of between $4.96 billion and $5.27 billion, up approximately 19 percent to 26 percent, and deliveries between 5,900 and 6,200 units with an average delivered price of between $840,000 and $850,000.

Toll Brothers' previous expectation was revenues between $4.76 billion and $5.36 billion, deliveries between 5,800 and 6,300 homes and average price range of $820 thousand to $850 thousand.

For the full year, analysts expect revenues of $5.04 billion.

Due primarily to a shift in its mix of deliveries, the company now expects its full-year adjusted gross margin to be between 25.6 percent and 25.8 percent of revenues, which is 30 basis points below the mid-point of its previous guidance of between 25.8 percent and 26.2 percent.