Toll Swings to Third-Quarter Loss

Toll Brothers (TOL Quote - Cramer on TOL - Stock Picks) swung to a loss in the third quarter but said in its earnings release Thursday that it sees signs of stabilization and pent-up demand in the housing sector.

The Horsham, Pa. luxury-home builder lost $29.3 million, or 18 cents a share. But excluding pre- and post-tax writedowns, the company earned $55 million, or 35 cents a share. In the comparable quarter a year ago, the company earned $26.5 million, or 16 cents a share, including writedowns and $115 million, or 70 cents a share, excluding them.

The company generated revenue of $797.7 million, down 34% from $1.21 billion in the third quarter of 2007.

The results beat analyst expectations, which called for a third-quarter loss of 36 cents a share on $771.7 million in revenue, according to the Thomson Reuters data.

"It appears that per-community traffic and deposits at our sites over the past several months have been stabilizing, albeit at historic lows. We also note that our number of cancellations this quarter, although still greatly elevated from our historic norms, is the lowest in nine quarters," said Chairman and CEO Robert Toll in a company statement.

Toll noted that weak consumer confidence and tightened mortgage lending standards have sidelined potential buyers. At the same time, single-family home construction starts have decreased 65% from their peak in January 2006. "We believe that most big public builders have sold off most of their spec inventory, which eventually should help stabilize home prices. However, we currently have to contend with foreclosures as the new low-priced competition," he said.

"Once the supply of foreclosed inventory is exhausted, we believe that favorable demographics will kick in and the housing market in general will begin to recover; unfortunately, we can't predict when that will occur," Toll said.

Shares of Toll were down 49 cents, or 2%, at $24.31 in recent premarket trading Thursday. Hovnanian, which posted a wider-than-expected third-quarter loss following the previous market close, was trading down 50 cents, or 6.5%, at $7.25.