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NEW YORK (TheStreet) -- Toll Brothers (TOL) CEO Douglas Yearley appeared on CNBC's "Power Lunch" on Tuesday afternoon to discuss the luxury home-building company's 2016 third quarter earnings. 

Before today's market open, the company reported earnings of 61 cents per share, which were in line with analysts' expectations. Revenue rose 23.5% to $1.27 billion, above analysts' estimates of $1.25 billion. 

The company benefited from the overall housing market, as sales of newly built homes rose 12.4% in July from a month earlier to a seasonaly adjusted annual rate of 654,000, the Commerce Department said Tuesday. This is the highest level in nine years. 

"I think [the housing data] confirms what we've shown this quarter," Yearley said. "We had 18% order growth." 

While some people say that the demand for luxury homes has dropped off, Yearley says he "doesn't buy it." "We haven't seen it," he said, adding that demand was up in every region for the company. 

The rise in orders is a result of "pent-up demand" as the country has been producing new homes below its normal level of 1.5 million homes for the past 10 years, Yearley explained. 

"There's so much pent-up demand from people that have not bought. Right now, with interest rates being low, they have more equity in their existing homes - that's been proven by statistics - and they're ready to move up," he said. 

Toll Brothers has also benefited from targeting baby boomers who have more cash to retire, Yearley said. The company specifically caters to adults over 50-years-old who want to move from the suburbs into a Toll Brothers community in the city. 

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"For many older couples who have a lot of equity in their bigger homes in the suburbs, it's a move down. They're paying all cash, and it's something they can certainly afford," he said. 

Shares of Toll Brothers were surging by 8.22% to $31.74 in mid-afternoon trading on Tuesday. 

Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.

TheStreet Ratings team rates Toll Brothers as a Buy with a ratings score of B. This is driven by some important positives, which the team believes should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks the team covers.

You can view the full analysis from the report here: TOL

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