NEW YORK (TheStreet) -- There's a housing boom again. At least, for the wealthy.
Luxury homebuilder Toll Brothers (TOL) 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.
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 StockTwits.com 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.
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.
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