Toll Brothers 3Q Profit Rises as Order Climb

by devteam August 24th, 2012 | Share

Toll Brothers, a home building companyrnactive in 20 states, buoyed Wall Street on Wednesday with a quarterly reportrnthat also gave the housing industry some much needed hope.  The Pennsylvania-based home builder said itsrnthird quarter income rose 46 percent, nearly twice what analysts had predicted.rn</p

Toll Brothers builds homes in the highrnmiddle and luxury price ranges so has not been battered quite as much byrncompetition from foreclosed homes as have builders in the entry level range.   Its target market is households which arernusually moving up from other homes and that the AP characterizes as making morernthan $100,000 a year, with good credit, high employment rates and generally ablernto afford down payments of 30 percent or more. rn</p

The company reported net income during FY 2012’s third quarter of $61.6rnmillion or $0.36 per share compared to $42.1 million or $0.25 per share in thernthird quarter of 2011.  Analysts’rnconsensus estimate was 18 cents per share.  Net income included pre-tax inventoryrnwrite-downs of $3.1 million and a net tax benefit of $18.7 million, compared tornpre-tax inventory write-downs of $16.8 million, a $3.4 million pre-tax lossrnfrom early repurchase of debt and a net tax benefit of $38.2 million in FYrn2011’s third quarter.</p

The company delivered 963 units ofrnhousing during the quarter, a 39 percent increase over the third quarter ofrn2011.  The average price of homesrndelivered was $576,000, compared to $557,000 in FY 2012’s second quarter andrn$569,000 in FY 2011’s third quarter.</p

Douglas C. Yearley, chief executivernofficer, stated: “We are enjoying the most sustained demand we’vernexperienced in over five years. In the past three quarters, the values of ourrnsigned contracts were up 45%, 51% and now 66% compared to FY 2011. Three weeksrninto our fourth quarter, our non-binding reservation deposits (a precursor tornfuture contracts) are up 59% compared to the same period in FY 2011.</p

“We believe the housingrnrecovery is being driven by pent-up demand, very low interest rates andrnattractively priced homes. Customers who have postponed buying for a number ofrnyears are moving into the market. With an industry-wide shortage of inventoryrnin many markets, we are enjoying some pricing power.</p

With the usual SEC required caveatrnon forward looking information, the company said it expected to deliver betweenrn800 and 1,000 homes in the fourth quarter at an average price of betweenrn$570,000 and $590,000 per home which would, if achieved, produce total homernsale revenue for FY 2012 of $1.71 billion to $1.84 billion and total deliveriesrnof between 3,000 and 3,200 homes. This compares to $1.48 billion and 2,611rnhomes in FY 2011.</p

Toll Brothers stock was up $1.43 orrn4.31 percent in early trading and its financial news carried most other homernbuilding stocks higher as well.  Stocks ofrnBeazer Homes, DR Horton, KB Homes and the Ryland Group were all up 4.3 to 4.86rnpercent.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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