Toll Brothers (TOL) revealed disappointing third-quarter sales and weaker profits on Wednesday as order growth decelerated, but the homebuilder said it is well positioned to ride the housing recovery.
While the average selling price on Horsham, Pa.-based Toll Brothers' homes increased by 13% to $651,000 and deliveries improved by 24%, order growth eased year-over-year during the quarter.
However, Toll Brothers is bullish on its growth prospects for the current quarter, predicting both deliveries and home prices growing to between 1,225 units and 1,425 units and $675,000 and $695,000, respectively, which would help boost fiscal 2013 home sale revenue by up to 39% to $2.62 billion from $1.88 billion last year.
“We believe the recovery is real and we are in the early stages of the rebound,” Toll Brothers CEO Douglas Yearley said in a statement.
The largest U.S. luxury homebuilder, which targets affluent customers, reported net income of $46.6 million, or 26 cents a share, in its most recent quarter, compared with a year-earlier profit of $61.6 million, or 36 cents.
The results matched average analyst estimates in a Thomson Reuters poll.
Excluding a $22.7 million tax expense, Toll Brothers said operating earnings were actually up about 58% to $68 million from $43 million in 2012.
Revenue for the three months ended July 31 rose 24% to $689.2 million from $553.3 million a year ago, but missed the Street’s view of $695.8 million.
Average sales contracts per community are now at levels recorded in 1997 and 1998, which Yearley says was "several years into the previous cyclical recovery."
Shares of Toll Brothers were down about a point in early trade to $31.40.