The streak of blowout earnings reports for
continued Wednesday as the huge-house erector posted a 46% jump in third-quarter earnings and predicted that results over the next two years will keep sizzling.
Huntingdon Valley, Pa.-based Toll Brothers earned $106.0 million, or $1.31 a share, in the three months ended July 31, compared with earnings of $68.2 million, or 90 cents a share, a year ago. Revenue jumped 46% from a year ago to $1.01 billion. Analysts had been expecting earnings of $1.19 a share on revenue of $984.4 million in the most recent quarter, according to Thomson First Call.
The news sent the stock up $1.75, or 4%, to $45.21 in Wednesday's premarket session. The shares have been steadily retracing their fall from grace last spring and currently sit about $3 below a 52-week high.
Homebuilders in the U.S. have spent the past year trying to convince Wall Street their business isn't on the verge of disaster due to rising interest rates, and none more vigorously than Toll Brothers, which sells primarily to rich people. The company's earnings release reads like a treatise on macroeconomic trends in the U.S. real estate markets and includes both the results of a Harvard demographics study and assertions involving "increasing regulatory land approval constraints that restrict supply."
The upshot is that Toll Brothers expects 30% earnings growth and 25% per-share earnings growth in the year ending October 2005, and 20% revenue and earnings growth the following year. The company says its current backlog gives it revenue visibility over the next nine to 12 months.
"We continue to demonstrate our ability to grow dramatically in a very difficult economy: Since 2000, despite an economic recession, dramatic job losses, a severe stock market slump and global political turmoil, we have doubled our revenue and net income," it said.
"While much of this can be attributed to the tremendous hard work of our associates, we also believe it reflects the strength of the luxury market, the brand name we have built, the growing number of affluent U.S. households and the industry's environment of greater stability and reduced cyclicality."