Toll Brothers results indicate steady housing recovery
(Reuters) - Toll Brothers Inc (TOL.N), the largest luxury homebuilder in the United States, reported a higher quarterly profit and said new orders rose sharply, indicating that the U.S. housing market is well on its way to recovery.
The U.S. housing recovery has gained traction this year with prices for single-family homes having risen since February. Economists expect home construction to add to U.S. economic growth this year for the first time since 2005.
Toll's shares were up 4 percent at $33.69 in early trading on Tuesday on the New York Stock Exchange. The stock has gained more than 50 percent so far this year.
The Standard & Poor's homebuilder index .GSPHOME has almost doubled in value this year.
(For a graphic on the U.S. housing market, click: r.reuters.com/pum86s)
Toll, which targets affluent customers who typically make at least $100,000 a year and have spotless credit records, said pent-up demand, rising home prices and low interest rates motivated buyers to return to the housing market in 2012.
The Federal Reserve, which has kept interest rates at rock-bottom levels since 2008 to support the housing market, launched an open-ended program to buy mortgage-backed securities in September.
Homebuilders such as D.R. Horton (DHI.N) and KB Home (KBH.N) also reported strong results.
Average selling prices for Toll rose to $582,000 in the fourth quarter from $565,000 a year earlier.
Toll -- the only publicly traded luxury homebuilder -- has gained market share as small and mid-sized private builders are constrained for capital.
Toll's net signed contracts jumped 70 percent to 1,098 units in the fourth quarter ended October. Backlog climbed 54 percent.
The company's cancellation rate -- the number of cancellations divided by the number of signed contracts -- fell to 4.6 percent in the August-October quarter from 7.9 percent a year earlier.
"With this backlog, and the lowest cancellation rate in our industry, we believe we will deliver between 3,600 and 4,400 homes in 2013 at an average price of between $595,000 and $630,000 per home," Chief Financial Officer Martin Connor said in a statement.
The forecast implies a growth of as much as 34 percent in deliveries.
Net income rose to $411.4 million, or $2.35 per share, in the fourth quarter from $15.0 million, or 9 cents per share, a year earlier.
The fourth-quarter profit included a net tax benefit of $350.7 million.
Revenue rose 48 percent to $632.8 million.
"While we are encouraged by the significant improvements in the company's operations, we believe (it) had an unusual level of pull-ins in the fourth quarter that distorted revenues," Williams Financial Group analysts led by Cody Acree said.
"We do not believe that this is a trendline that can be carried into the first quarter at the same pace."
(Reporting by Sagarika Jaisinghani in Bangalore; Editing by Roshni Menon)