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Toll Brothers says home orders point to strong spring sales
February 23, 2016 / 10:15 AM / 2 years ago

Toll Brothers says home orders point to strong spring sales

(Reuters) - Toll Brothers Inc (TOL.N), the largest U.S. luxury homebuilder, said it expected higher demand in the all-important spring selling season, suggesting that a recovery in the U.S. housing market remained intact despite a massive stock market sell-off and slowing economic growth.

A Toll Brothers home under construction is seen in Broomfield, Colorado February 25, 2014. REUTERS/Rick Wilking

Shares of Toll Brothers, which also reported a higher-than-expected rise in first-quarter revenue after raising prices, rose as much as 4.7 percent to $27.25, their biggest percentage gain in a year.

Toll Brothers said on Tuesday buyer traffic increased 13 percent in the first three weeks of February, raising hopes for the spring selling season.

A healthy traffic indicated that the “buyer mentality” had not shifted amid recent stock market decline and global economic uncertainty, Chief Executive Douglas Yearley told analysts on a conference call.

“The stock market seems to be pricing in a steep decline in the economy and, along with it, our sector,” Executive Chairman Robert Toll said.

“We, on the other hand, are seeing signs that reflect strength and positive momentum in our business.”

Toll Brothers, whose homes can cost more than $2 million, said orders rose 17.6 percent to 1,250 homes in the first quarter ended Jan. 31, led by a 79 percent increase in its Northern Virginia region.

The company’s “order trends suggest the recovery in housing remains intact,” UBS analyst Susan Maklari wrote in a note to clients.

Toll Brothers said it now expected to sell 5,700-6,400 homes in 2016, compared with 5,600-6,600 estimated previously.

The company raised the low end of its 2016 average selling price forecast to $810,000-$850,000, from $800,000-$850,000.

Low interest rates and a steady rise in employment have allowed homebuilders to raise prices.

Toll Brothers said its average price of homes sold rose about 12 percent to a record $873,500 in the first quarter ended Jan. 31.

New U.S. single-family home sales rose 10.8 percent to a seasonally adjusted annual rate of 544,000 units in December, the highest level since February 2015. (reut.rs/1oFkq2j)

Revenue rose to $928.6 million in the quarter from $853.5 million a year earlier.

The company’s net income fell to $73.2 million, or 40 cents per share, from $81.3 million, or 44 cents per share, a year earlier, due to higher labor and material costs.

Analysts on average had expected earnings of 40 cents per share on revenue of $916.3 million, according to Thomson Reuters I/B/E/S.

Up to Monday’s close, Toll Brothers’ stock had fallen about 30.9 percent in the past 12 months, while the Dow Jones U.S. home construction index .DJUSHB decreased about 13.5 percent.

Reporting by Radhika Rukmangadhan and Ankit Ajmera in Bengaluru; Editing by Anil D'Silva and Don Sebastian

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