Luxuy Home Builder Toll Brothers (TOL) Results Shows Major Improvement
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Toll Brothers (NYSE: TOL) is higher this morning after reporting a surprise 42 percent increase in net contracts. The homebuilder said that it expected to see its fourth-quarter revenue to drop by 30 percent, however the company released preliminary results that beat Wall Street estimates by over $100 million in the quarter ended on October 31, 2009.
Revenue for the company is expected to be at $486.6 million, well ahead of the market estimate of $386.2 million. The news of the improved revenue and contracts has given shares of Toll Brothers a 7.5 percent increase in pre-market trading.
"We have definitely progressed from one year ago," Robert I. Toll, Chairman and CEO of Toll Brothers. "The shock to the financial system in mid-September 2008 that shut down the capital markets appears to be mostly behind us."
The luxury homebuilder said that the number of net contracts increased 42 percent to 765 units. The first-time home buyer tax credit has helped to stabilize the housing market since the summer months help the resale and new sale of homes in the U.S.
"Our fourth-quarter unit deliveries exceeded the high end of our range of guidance due to the delivery of a higher percentage of our backlog, fewer cancellations, and the sale of quick delivery homes," Toll said.
The company's results reported yesterday are preliminary and unaudited. Toll Brothers will report its final fourth quarter and 2009 fiscal year results on December 3.
The results were so convicing to analysts at Wells Fargo Securities, that they upgrade the stock Market Perform to Outperform with a $24-$26 valuation range. The firm suggests TOL should be profitable in FY10, has dwindling competition in its customer niche and substantial presence in the supply-constrained Northeast, plus a competitive advantage in its willingness and ability to develop its land with the balance sheet to do so.
Shares of Toll Brothers are currently at $19.77 today before the market opens.
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