HORSHAM, Penn. (
booked strong order growth and improved margins, narrowing its quarterly losses with better-than-expected results, leading stocks in the homebuilder sector higher on Wednesday.
SPDR S&P Homebuilders
, an exchange-traded fund that tracks the homebuilder sector, remains around 60% off its peak of $46.08 in early 2006. The
iShares Dow Jones U.S. Home Construction
ETF remains more than 70% off its peak of $50.10 in the spring of 2006.
The ETFs were 0.7% and 1.6% higher, respectively, Wednesday morning.
Toll Brothers shares rose 4.3% to $21.15, following the release of its quarterly report.
Elsewhere in the sector,
gained 2.9% to $18.24,
added 1.5% to $7.58,
pushed 1.8% higher to $11.68 and
rose 1.6% to $11.47.
bucked the trend, falling 0.3% to $3.59.
Stifel Nicolaus analyst Michael Widner noted that Toll Brother's "headline results were dragged down by $32.5M (13 cents per share after taxes) of impairment and other charges," though excluding those charges "earnings would have been roughly breakeven."
The analyst expected Toll Brothers to book declines in order growth and gross margin, and said that year-over-year improvement on those line items were "very solid relative to industry trends that were clearly weaker."
Toll Brothers booked 7% order growth and improved gross margins by 50 basis points to 17.6%.
Despite improvements, Widner maintained a sell rating and $18 fair value estimate on Toll Brothers shares, noting that the builder's valuation "still appears rich to us."
Standard & Poor's homebuilders analyst Ken Leon was more bullish, maintaining a buy rating and $24 price target on Toll Brothers' stock, though he lowered his fiscal 2011 and 2012 earnings-per-share estimates by 25 cents and 15 cents, respectively.
Data released on Tuesday showed that
sales of newly built homes rose 7.3% in April to a seasonally adjusted annual rate of 323,000, a bigger jump than expected.
The Commerce Department report noted that April's new-home sales figure remained 23.1% below year-earlier levels, when
buyers rushed to take advantage of federal tax credits for homebuyers.
Data released last week showed that
April housing starts dropped 10.6% while construction permits fell 4%. The figures were discouraging since building permits are viewed as an indication of future home construction.
The National Association of Home Builders' index of builder sentiment came in flat in May, month-over-month, despite a rise in home sales, as interest among potential buyers remained sluggish.
The NAHB's confidence index, which measures builder perceptions of current single-family home sales and sales expectations for the next six months, held steady at a reading of 16, according to the report. Any reading below 50 indicates poor sentiment. The index has not been above 50 since April 2006.
"Builder confidence has hardly budged over the past six months as persistent concerns regarding competition from distressed property sales, lack of production credit, inaccurate appraisals, and proposals to reduce government support of housing have continued to cloud the outlook," said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev.
"In addition, many builders in this month's survey cited high gas prices as a further contributor to consumer anxiety and reluctance to go forward with a home purchase."
-- Written by Miriam Marcus Reimer in New York.
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