Toll Brothers Q3 Results Surge, Top Estimates; Tightens FY14 View

(RTTNews) - Luxury home builder Toll Brothers, Inc. (TOL) reported Wednesday a significant growth in third-quarter earnings, as revenues were boosted by higher prices and home deliveries. Both earnings and revenues topped analysts' estimates. Further, the company narrowed its forecast for fiscal 2014 home deliveries, while it lifted sales price view.

For the three months to July, net earnings surged 110 percent to $97.7 million or $0.53 per share from $46.6 million or $0.26 per share a year earlier. On average, twenty analysts polled by Thomson-Reuters were looking for earnings of $0.45. Analysts' estimates typically exclude one-time items.

Quarterly revenues climbed 53 percent to $1.06 billion from $689.16 million last year, and came in above the $987.24 million Wall Street expected.

Home-building deliveries rose 36 percent to 1,444 units from 1,059 units a year ago. Average price of home grew to $732 thousand from $651 thousand a year earlier.

Meanwhile, net signed contracts in the quarter decreased 4 percent in dollars to $949.1 million and 6 percent in units to 1,324 units.

On a per-community basis, third-quarter net signed contracts were 5.25 units, lower than 6.24 units last year. Although this was a year-over-year decline, it was the second highest per-community third quarter total since fiscal 2006, the company said.

Backlog of $3.1 billion and 4,204 units rose 9 percent in dollars and 5 percent in units. At third-quarter end, the average price of homes in backlog was $737 thousand, compared to $709 thousand at the prior year.

Gross margin, excluding interest and write-downs, was 26.8 percent, compared to 25.1 percent last year. Operating margin improved to 12.3 percent from prior year's 8 percent.

Douglas Yearley, Toll Brothers' chief executive officer, stated, "We are encouraged by our traffic, which was up 13 percent on a per community basis for the quarter compared to FY 2013. This pattern has continued into August, with traffic up 19 percent per community versus last August."

Looking ahead for fiscal 2014, Toll Brothers narrowed its deliveries guidance to between 5,300 and 5,500 homes from the previously projected range of 5,100 to 5,850. Toll Brothers expects annual home sales revenue of $3.76 billion and $3.99 billion, compared to $2.67 billion and 4,184 homes in 2013.

The company now projects average price of deliveries would be between $710 thousand and $725 thousand per home, compared to between $690 thousand and $720 thousand in the previous guidance.

Gross margin for the year is now projected to improve between 185 and 200 basis points, compared to previous estimate of 175 to 200 basis points increase.

The company also narrowed the range of expected selling communities to between 255 and 275 communities from the 250-290 range in the previous guidance.

On the NYSE, Toll Brothers shares gained 0.11 percent on Tuesday and settled at $35.63. In the after hours trading, shares gained 0.65 percent further.