Earnings Preview: Toll Brothers

AP News
Posted: Dec 01, 2009 5:02 PM

Toll Brothers Inc., the nation's largest builder of luxury homes, reports fiscal fourth-quarter earnings on Thursday. The following is a summary of key developments for the period.

OVERVIEW: The Horsham, Pa.-based company has operations in 21 states and was ranked the 14th largest homebuilder in the U.S. last year by Builder magazine. It is expected to report a quarterly loss for the three months ended Oct. 31.

Homebuilders have seen new home orders improve this year, thanks to low mortgage rates and a tax credit of up to $8,000 for first-time homebuyers.

Sales of new homes have increased six out of the past seven months. They dipped in September, but surged in October to the highest level in more than a year.

Last month, Toll Brothers said buyers signed 42 percent more contracts for new homes during its fiscal fourth quarter. The builder, which has started cutting incentives and raising its prices in select communities, also saw fewer buyers back out of contracts.

Still, revenue plunged by 30 percent to $430.8 million, partly because the company has fewer communities around the country than it did last year.

Robert Toll, the builder's chairman and chief executive officer, said consumer confidence, increasingly stable home prices and a gradual decline in the supply of unsold homes suggest the market for new homes is improving.

"We sense that it is, though slowly and through choppy waters," Toll said.

Despite the lift in home sales, job losses and tighter mortgage lending standards continue to weigh on would-be buyers.

Foreclosures, meanwhile, remain a thorn in the side of builders. The properties lure some buyers away from new homes and push home values lower, which in turn forces builders to adjust the value of their assets.

As a result, builders continue to struggle to turn a profit.

Toll estimated it will book between $50 million and $125 million in write-downs related to land and other assets for the quarter.

BY THE NUMBERS: Analysts surveyed by Thomson Reuters predict a loss of 40 cents a share on revenue of $450.1 million for the quarter. The 20 earnings estimates range from a profit of 2 cents to a loss of 80 cents a share.

In its fiscal fourth quarter last year, Toll lost $78.8 million, or 49 cents a share, on revenue of $698.9 million.

WHAT'S AHEAD: Homebuilders and other housing groups convinced lawmakers to extend the first-time buyer tax credit through April 30. Congress also expanded the program to include a $6,500 credit for existing homeowners who have lived in their current residence for at least five years. That could help Toll Brothers, which caters primarily to seniors and homeowners looking to buy a second home or trade up to a fancier property.

STOCK PERFORMANCE: Toll Brothers shares tumbled 13 percent to finish the quarter at $17.32. The stock slipped 4 cents to close at $19.45 Wednesday.


On the Net:

Toll Brothers: http://www.tollbrothers.com/