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Toll Brothers' Earnings Show Housing Boom for Wealthy: StockTwits

NEW YORK (TheStreet) -- There's a housing boom again. At least, for the wealthy.

Luxury homebuilder Toll Brothers  (TOL - Get Report) reported Wednesday that sales rose 67% in the second quarter to $860.4 million. Those results beat consensus estimates by nearly $30 million and showed the strength of housing demand -- for new homes priced above half-a-million dollars in notoriously expensive markets like New York and California.

Another win for the housing recovery. $TOL handily beat forecasts and signed contracts were up 7% in the latest quarter. $XHB $ITB ? catherine tymkiw (@ctymkiw) May. 28 at 07:12 AM

Toll Brothers' profits underscored the strength of demand for high-end new homes. The company reported earnings per share of 35 cents for the quarter, more than double its earnings for the same period a year ago. Toll Brothers' earnings also blew past the consensus call for 26 cents per share.

Some on said the results indicated good things to come from homebuilders in general -- and the housing market. New home sales rose 6.4% in April from March, according to a May report by the Commerce Department. That increase beat economist consensus estimates.

$TOL profit more than doubles as deliveries surge; should be a positive catalyst for home builders $XHB $ITB ? Ben Silverberg (@silverjet2) May. 28 at 06:39 AM

Toll Brothers was able to deliver such profit outperformance by raising prices. Operating margin expanded from 3.2% in the second quarter of 2013 to 7.9% in the prior quarter. The average price of homes sold in the quarter rose to $706,000 from $577,000 in the same period last year. They also rose from the first quarter's $694,000 average selling price.

"As expected, we saw significant positive leverage in our operating margin, which grew to nearly 8%," said Toll Brothers' Chief Financial Officer Martin P. Connor in a statement. "We note that the average price of new signed contracts in the current quarter declined from the last quarter as a result of some changes in geographic and product mix, but not from additional incentives."

Toll Brothers' shares rose more than 4% in premarket trading. The S&P Homebuilders Index  (XHB) edged higher yesterday.

Toll Brothers said it expects to deliver between 5,100 and 5,850 homes this year at an average price of between $690,000 and $720,000 per home. The anticipated average price is higher than the previously provided range.

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At the time of publication the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.


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