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Toll Brothers (TOL)
Toll Brothers Shares Climb Despite Lower Earnings
Despite reporting lower earnings and a lowered guidance, shares of Toll Brothers were on the rise Tuesday morning, climbing roughly 2.5 percent. The lowered earnings, which were reported before the markets opened, still came in above expectations. Other home builders, including Pulte Homes Inc.and KB Home were also up on the news. Robert I. Toll, the company's chairman and chief executive, expressed concerns about consumer confidence though, so what does the future look like for Toll Brothers?
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Profits for the third quarter were down 19 percent, coming in at $174.6 million, or $1.07 a share, as compared to the year-ago period's profit of $215.5 million, or $1.27 a share. Revenues were down 1 percent, falling from $1.55 billion last year to $1.53 billion for the third quarter this year. Analysts surveyed by Thomson Financial were expecting revenues to come in at $1.54 billion, and for earnings to be $1.04 a share. For the full year, Toll Brothers revised their guidance to $4.41 to $4.63 a share, down from $4.69 to $5.16 a share.
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In a statement, Robert I. Toll said, "The speculative buyers of 2004 and 2005 are now sellers," and added, "Builders that built speculative homes are trying to move them by offering large incentives and discounts and some anxious buyers are canceling contracts for homes already being built." Commenting on a "continuing malaise" in the housing market, he said, "This overhang in supply and the aggressive discounting of many builders is undermining consumer confidence and keeping buyers on the sidelines as they continue to worry about the direction of home prices."
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In 2007, Toll Brothers expects to sell between 7,000 and 8,000 homes. However, some analysts aren't ready to buy such a picture. Daniel Oppenheim, an analyst with Banc of America Equity Research wrote, "The guidance seems to imply an uptick in orders in '07, something we're not yet ready to assume." Earlier this month, Toll Brothers said that their cancellation rate was 18 percent, and that the rate was highest in areas that were some of the hottest markets last year. It will be interesting to see what direction the markets move in, and what effect that has for Toll Brothers.
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Profile |
The Company's principal activities are the development, construction and sale of residential housing. The Company also makes arrangement of finance for single family detached and attached homes in middle and high income residential communities catering to both move-up and empty nester home buyers. The Company operates its own architectural, engineering, mortgage, title, security monitoring, landscape, lawn maintenance, insurance brokerage, cable television, broadband internet access, component assembly and manufacturing operations. It markets its homes primarily to middle-income and upper-income buyers. In 2003 the Company acquired Richard R. Dostie Inc & The Manhattan Building Company.
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