Toll Brothers Q3 Profit Down On Tax Expenses

(RTTNews) - Luxury homes builder Toll Brothers Inc. (TOL) reported Wednesday a decline in third-quarter profit, reflecting tax expenses and the absence of last year's tax benefit. Pre-tax profit climbed on higher deliveries and sales prices. Revenues missed Street view, despite a double - digit growth.

Chief Executive Officer Douglas Yearley stated, "Sales volumes and pricing power both increased this quarter from one year ago, a pattern consistent with recent quarters. We believe the recovery is real and we are in the early stages of the rebound."

The company's third-quarter net income decreased to $46.6 million or $0.26 per share from $61.64 million or $0.36 per share last year. The latest quarter results included pre-tax inventory write-downs of $0.2 million and a tax expense of $21.7 million, while prior year results included pre-tax write-downs of $3.1 million and a tax benefit of $18.7 million.

On average, 20 analysts polled by Thomson Reuters expected the company to report profit per share of $0.26 for the quarter. Analysts' estimates typically exclude special items.

Pre-tax income was $68.25 million for the quarter, higher than $42.95 million in the prior year.

Quarterly revenues rose 24 percent to $689.16 million from $554.32 million last year. Analysts expected revenue of $695.52 million for the quarter. Homebuilding deliveries were 1,059 units, 10 percent higher than 963 units a year ago. The average price of homes delivered was $651 thousand, higher than $576 thousand in the previous year.

In the quarter, net signed contracts increased 47 percent in dollars to $992.6 million and 26 percent in units to 1,405 units. Cancellation rate was 4.6 percent, same as last year. Backlog of $2.84 billion and 4,001 units rose 75 percent in dollars and 56 percent in units from the previous year.

Gross margin, excluding interest and write-downs, was 25.1 percent, compared to 24.4 percent a year earlier with the increase in pricing power and volume.

The company said its land position grew to 47,200 lots from 39,200 one year ago.

Looking ahead, Toll Brothers currently estimates to deliver between 1,225 and 1,425 homes in the fourth quarter at an average price of between $675 thousand and $695 thousand per home. With this, total home sale revenue for fiscal 2013 is projected to be between $2.46 billion and $2.62 billion and total deliveries between 3,925 and 4,125 homes. This compares to last year's sales revenues of $1.88 billion and deliveries of 3,286 homes.

The company previously expected to deliver between 3,850 and 4,200 homes in fiscal 2013. Average delivered price for the year was estimated to be in the range of $610 thousand to $630 thousand per home.

The company expects community count, which was 225 at third quarter-end, would remain stable through the end of fiscal 2013 and to grow by 10 percent to 15 percent by fiscal 2014.

The company also projects gross margin and operating margin improvement to continue in the fourth quarter and in fiscal 2014.

Toll Brothers shares closed Tuesday's trading at $31.64, up $0.96 or 3.13 percent. In the extended trading, shares gained 1.45 percent further to $32.10.