* First-quarter earnings $0.03/share vs est $0.10
* Revenue $424.6 mln vs est $502.2 mln
* Quarterly orders rise, promising revenue growth
* Expects rental business to be profitable from 2015
* Shares down 9 percent
By Mridhula Raghavan and Sagarika Jaisinghani
Feb 20 Toll Brothers Inc, the largest
U.S. luxury homebuilder, closed fewer sales than analysts had
expected in the first quarter and lagged a housing market
recovery by missing Wall Street estimates on earnings, sending
its shares down 7 percent.
A 49 percent quarterly rise in orders, however, promises an
improvement later in the year as sales are translated into
revenue for a company that targets high earners.
"(Toll's) business is primarily very lumpy, just because of
the products that they sell," Williams Financial Group analyst
David Williams said.
"If you're expecting them to deliver in the first quarter
and they get pushed to the second, you can have a dramatic shift
in both the top and bottom line."
The U.S. housing market last year began its recovery from a
rut that preceded the country's worst recession since the Great
Depression. Single-family homes have risen in price every month
since February 2012 and home construction added to U.S. economic
growth last year for the first time since 2005.
"After seven years of trepidation, buyers are re-entering
the housing market," Executive Chairman Robert Toll said in a
statement accompanying the company's results.
Homebuilders such as D.R. Horton Inc and Pultegroup
Inc, which target first-time buyers and those upgrading
to their second property, have taken advantage of growing demand
and raised their prices.
Toll, the only publicly traded luxury homebuilder, has also
benefited as some small and medium-sized private builders have
been constrained for capital. Before Wednesday, its shares had
gained 55 percent in the last 12 months.
But the Horsham, Pennsylvania-based company, which targets
customers who typically earn in excess of $100,000 a year, said
it had completed 746 homes in the quarter to Jan. 31, compared
with 1,088 homes in the fourth quarter.
Toll also said it expected to finish up to 4,300 homes in
the year to October 2013, down from the 4,400 it had forecast.
It said the average selling price for homes completed in the
quarter fell to $569,000 from $571,000 a year earlier as it
closed fewer sales of its more expensive homes.
First-quarter revenue rose 32 percent to $424.6 million,
missing analysts' expectations of $502.2 million. The company
earned 3 cents per share, below the forecast 10 cents.
Its shares fell to $34.15 on the New York Stock Exchange on
APARTMENTS FOR RENT
Williams said he was not concerned that Toll was losing out
on demand, particularly as the company's orders - a key
indicator for builders which only earn revenue when they close
on a home - jumped to 973 homes in the first quarter.
"We are continuing to gain market share and see little
competition from local private builders," Toll Chief Executive
Douglas Yearley said in the statement.
In a conference call with analysts, Chief Financial Officer
Martin Connor highlighted the company's Touraine project - 22
homes in a boutique building in Manhattan's Upper East Side - as
an example of delayed growth.
"Our Touraine project is now estimated to begin deliveries
in May rather than April. That's a shift from our second to our
third quarter," he said. Residences at the development range in
price from about $3 million to $20 million.
Toll also said on Wednesday it would enter the apartment
rental business to take advantage of rising rents and low
supply. A tight credit market and high unemployment rates have
encouraged many consumers to rent, rather than own, homes.
The company said it had assembled sites for about 4,000
rental apartment units and that it expected the new business to
start making money from 2015. Company spokesman Frederick Cooper
said the apartments would be "upscale".
Data from real-estate research firm Reis Inc show rents have
risen for 12 straight quarters and apartment vacancy rates are
at their lowest since the third quarter of 2001.
No. 3 U.S. homebuilder Lennar Corp said last month
it would also venture into the apartment rental market.