Toll Brothers Mitigates Pain

Updated from 1:20 p.m. EDT

Toll Brothers'(TOL) optimistic revenue forecast and better-than-expected land situation helped shares move higher Tuesday, overshadowing a widely expected guidance cut.

For the third quarter ended July 31, the Horsham, Pa., company posted earnings of $174.6 million, or $1.07 a share. The profit was down from the year-ago $215.5 million, or $1.27 a share. Revenue fell to $1.53 billion from $1.55 billion a year earlier.

Analysts polled by Thomson First Call expected a $1.04-a-share profit.

Toll said the latest quarter included $23.9 million, or 9 cents a share, worth of writedowns, related mostly to lots under option in California and Florida.

The writedown issue has clouded the stock since Toll announced earlier this month that land option deposits would be forfeited. At the time, the company didn't specify the amount of the charge.

"The market thought (the writedown issue) was going to be worse than it was," says Jack Lake, an analyst with Victory Capital Management, which owns shares of Toll and other homebuilders. "So what you're seeing today is a little bit of a sigh of relief."

Toll shares recently were up $1.02, or 4.1%, to $25.79.

The nation's largest luxury-house builder projected fiscal-year earnings of $4.41 to $4.63 a share, down from its previous guidance of between $4.69 and $5.16 per share. The lowered projection was widely anticipated after Toll trimmed its full-year house-delivery forecast earlier this month.

Analysts already had taken down their full-year estimates, with the average estimate calling for earnings per share of $4.40.