* 2nd-qtr adj earnings $0.09/share vs $0.07 est
* Revenue rises 38 percent
* Orders rise 36 percent
* Shares up 7 percent
By Mridhula Raghavan
May 22 Luxury homebuilder Toll Brothers Inc
reported stronger-than-expected results on higher
average selling prices and booked its highest quarterly orders
in seven years, sending its shares up 7 percent.
Record-low interest rates and rising rents have encouraged
more Americans to buy homes after the housing market bust, but
concerns over rising costs for land, building materials and
labor have dented builders' enthusiasm in the last few months.
Toll missed Wall Street expectations last quarter as costs,
including high lumber prices, hurt profits.
But a tight inventory of available homes has helped to
counteract this in the second quarter.
"We are finding that in many markets as prices increase, a
sense of urgency takes hold and demand continues to rise," Toll
Brothers Chief Executive Douglas Yearley said in a statement on
Wednesday. "Buyers who have been on the sidelines for six years
are jumping in."
The company said new orders, a key indicator for builders --
which do not recognize revenue until they close on a home --
rose 36 percent to 1,753 homes in the second quarter. The value
of these orders jumped 57 percent to $1.19 billion.
Toll Brothers, which targets affluent customers earning
about $200,000, said its average selling price increased 3.6
percent to $577,000 in the second quarter.
"As long as home prices are going up faster than costs, they
are going to see their margins increase. I think that's
definitely happening for all homebuilders," UBS Investment
Research analyst David Goldberg said.
Toll, the only publicly traded U.S. luxury homebuilder, has
also gained market share as small and mid-sized private builders
remain constrained for capital.
The U.S. homebuilder sentiment index rose to 44 in May from
41 in April as sales improved, suggesting the housing market
recovery still has momentum, data from the National Association
of Home Builders showed last week.
A reading below 50 means that more builders view market
conditions as unfavorable than favorable. While the index has
not crossed 50 since April 2006, it was up 16 points from a year
earlier despite two months of losses.
Toll's net income rose to $24.7 million, or 14 cents per
share, from $16.9 million, or 10 cents per share, a year
earlier. The profit included a pretax gain of $13.2 million.
Excluding items, the company earned 9 cents per share, 2
cents ahead of the average analyst estimate.
Revenue rose 38 percent to $516 million, above the average
forecast of $512.4 million, according to Thomson Reuters
Toll Brothers shares, which have gained about 11 percent
this year, were up 7 percent at $38.58 on the New York Stock
Exchange on Wednesday.