Toll Brothers (NYSE: TOL) reported Q2 EPS of $0.73, $0.10 better than the analyst estimate of $0.63. Revenue for the quarter came in at $1.36 billion versus the consensus estimate of $1.27 billion.

• FY 2017’s second-quarter net income was $124.6 million, or $0.73 per share diluted, compared to net income of $89.1 million, or $0.51 per share diluted, in FY 2016’s second quarter.
• Pre-tax income was $199.2 million, compared to pre-tax income of $140.4 million in FY 2016’s second quarter. Second quarter FY 2017 included inventory write-downs of $4.3 million, compared to $6.4 million in FY 2016’s second quarter.
• Revenues of $1.36 billion and home building deliveries of 1,638 units increased 22% in dollars and 26% in units, compared to FY 2016’s second quarter. The average price of homes delivered was $832,400, compared to $855,500 one year ago. The drop in the average price of homes delivered, as well as in contracts and backlog, was due to mix changes.
• Net signed contracts of $2.02 billion and 2,511 units rose 23% in dollars and 26% in units, compared to FY 2016’s second quarter. The average price of net signed contracts was $804,200, compared to $825,500 one year ago.
• On a per-community basis, FY 2017’s second-quarter net signed contracts was 7.82 units per community, compared to second-quarter totals of 6.80 in FY 2016, 7.43 in FY 2015, and 7.14 in FY 2014.
• For the first three weeks of FY 2017’s third quarter, beginning May 1, 2017, non-binding reservations deposits were up 12% in units, compared to the same period in FY 2016.
• Backlog of $5.00 billion and 6,018 units rose 19% in dollars and 22% in units, compared to FY 2016’s second-quarter-end backlog. The average price of homes in backlog was $831,000, compared to $848,600 one year ago.
• Gross margin, as a percentage of revenues, was 21.0% in FY 2017 second quarter, compared to 22.0% in FY 2016’s second quarter. Adjusted Gross Margin, which excludes interest and inventory write-downs (“Adjusted Gross Margins”), was 24.3%, compared to 25.7% in FY 2016’s second quarter.
• Other income and Income from unconsolidated entities totaled $61.0 million, compared to $23.8 million one year ago.
• The Company ended its second quarter with 316 selling communities, compared to 321 at FY 2017’s first-quarter end, and 299 at FY 2016’s second-quarter end.
• Based on FY 2017’s second-quarter-end backlog and the pace of activity at its communities, the Company now estimates it will deliver between 6,950 and 7,450 homes in FY 2017, compared to previous guidance of 6,700 to 7,500 units, at an average delivered price for FY 2017’s full year of between $775,000 and $825,000 per home. This translates to projected revenues of between $5.4 billion and $6.1 billion in FY 2017, compared to $5.17 billion in FY 2016.
• The Company reaffirms its previous guidance for full FY Adjusted Gross Margin of between 24.8% to 25.3%, SG&A as a percentage of revenues of 10.6%, Other income and Income from unconsolidated entities of $160 million to $200 million and effective tax rate of 37.5%.
• The Company expects FY 2017 third-quarter deliveries of between 1,675 and 1,975 units with an average price of between $790,000 and $815,000.
• The Company expects its third-quarter FY 2017 Adjusted Gross Margin to improve 10 basis points from FY 2017’s second-quarter results.
• FY 2017 third-quarter SG&A is expected to be approximately 10.4% of third quarter revenues.
• The Company’s third-quarter FY 2017 Other income and Income from unconsolidated entities is projected to be between $15 million and $30 million.
• The FY 2017 third-quarter effective tax rate is projected to be approximately 39.0%.

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