NEW YORK (TheStreet) -- Homebuilder Toll Brothers (TOL) said Wednesday that its profits doubled during the third quarter of its fiscal year, ending in July. Don't get carried away, though -- it's still too early to buy the stock.
Profit rose 110% to $97.7 million, or 53 cents a share, which beat analyst estimates by a tidy eight cents. Normally that would make the stock pop. But Toll dropped 3.25% as of 11 a.m. to $34.48.
The reason is a 6% decline in the number of new homes ordered during the quarter, which points to soft revenues in coming quarters when those deals would close. The average Toll Brothers community sold one home fewer than in the same quarter of last year, for an overall decline of 80 homes at an average price tag of $717,000. Toll Brothers also lowered the top end of its guidance for this year, saying it will deliver between 5,300 and 5,500 homes rather than the previous estimate of 5,100 to 5,850.
Toll's strategy, which management will explain in more detail later today, is to manage the company for profit now while positioning itself to ride any wave of pent-up demand as the economy improves. But the company concedes that that wave has not shown up yet, and that its pricing power is weakening, if slightly.