(Reuters) - U.S. luxury homes builder Toll Brothers Inc’s (TOL.N) revenue increased more than expected for the fifth straight quarter, boosted by higher home sales and average selling prices, and the company also gave an encouraging outlook.
Toll Brothers, whose homes can cost upwards of $2 million, on Tuesday also introduced a new line of homes to cater to affluent millennials, a move that could boost demand but will lower its average price.
“We are encouraged as we look to FY 2017,” Chief Executive Douglas Yearley said in a statement. “We are seeing positive demand trends in many regions.”
A strengthening U.S. housing market – housing starts surged to a more than nine-year high in October – rising wages due to an improving job market as well as low mortgage rates have spurred demand.
Toll Brother, whose shares were up 1.64 percent in premarket trading, said orders – a key metric of future revenue for homebuilders – rose 20.3 percent, the most in more than two years, in the fourth quarter.
To attract buyers under the age of 35, Toll Brothers plans to sell high-end homes with fewer structural options at slightly lower prices and quicker delivery times.
However this move will dent prices.
Toll Brothers forecast its average selling price would fall between 3 percent and 9 percent in its current fiscal year.
U.S. house prices are set to rise almost 5 percent next year, despite the prospect of several interest rate increases, according to the latest Reuters poll.
The company said it expects to deliver between 6,500 and 7,500 homes in fiscal 2017, more than in 2016, at an average price of between $775,000 and $825,000.
Toll Brothers’ average selling price increased 5.6 percent to $834,300 in the fourth quarter, while the number of homes sold rose to 2,224 from 1,820.
That helped revenue increase 29.1 percent to $1.86 billion.
However, net income fell 22.3 percent to $114.4 million, or 67 cents per share, weighed down by charges.
Excluding $121.2 million in warranty charges mainly related to older stucco homes and including some inventory writedowns, the company earned $1.15 per share.
Analysts on average were expecting a profit of 99 cents per share and revenue of $1.79 billion, according to Thomson Reuters I/B/E/S.
The company’s shares have dropped 8.5 percent this year through Monday, roughly the same as the decline in the Dow Jones U.S. home construction index .DJUSHB.
Reporting by Arunima Banerjee in Bengaluru; Editing by Savio D'Souza