(TOL) Toll Brothers Misses Profit Estimate

Toll Brothers Inc. (TOL) reported a net income of $42.1 million or 25 cents per share during the third quarter of fiscal 2011 compared with a net income of $27.3 million or 16 cents per share in the year-ago quarter. Reported income in the 2011 quarter included a tax benefit of $38.2 million and that in the 2010 quarter included a tax benefit of $26.5 million.

Excluding the tax benefits, adjusted income in the quarter was $3.9 million or 2 cents per share, a penny lower than the Zacks Consensus Estimate of 3 cents per share. Adjusted income in the last year quarter amounted to $0.8 million.

Third quarter pre-tax income was $24.1 million (excluding write-downs and debt retirement charges of $16.8 million and $3.4 million, respectively) compared with $14.0 million (excluding write-downs and debt retirement charges of $12.5 million and $0.7 million, respectively).

Revenues declined 13% year over year to $394.3 million, driven by a 14% decrease in home deliveries to 693 units.  The demand for luxury homes fell in the quarter driven by poor industry conditions and subdued confidence among luxury homebuyers. At the quarter end, the company’s total selling communities amounted to 207 versus 190 selling communities at the end of the prior-year quarter.

The company signed gross contracts worth $439.2 million in the quarter compared with $422.5 million in the prior year. The average price per unit of gross contracts signed was approximately $570,000 compared with $566,000 last year. Total value of net contracts signed amounted to $406.7 million at an average price of $570,000 versus $400.1 million of net contracts at an average price of $571,000 in the previous year.

The company’s total backlog at the end of the quarter totaled 1,780 homes (valued at $1.02 billion) compared with 1,636 units (valued at $939.4 million) a year ago. Cancellation rate increased to 7.4% this quarter from 6.2% in the year-ago quarter.

Toll Brothers ended the quarter with lower cash balance. The company had cash and cash equivalents of $890.1 million as of July 31, 2011 compared with $1.04 billion as of October 31, 2010. Inventories stood at $3.42 billion at July 31, 2011 compared to $3.24 billion as on October 31, 2010.

The company expects to deliver 2,475 to 2,675 homes in fiscal 2011, including its estimate to deliver 620 to 820 homes in the fourth quarter at an average price band of $555,000 to $570,000. Total selling communities are projected between 210 and 220.

Based in Horsham, Pennsylvania, Toll Brothers, a Zacks#3 Rank (Hold rating), is engaged in the development, construction, financing, and sale of residential homes in the United States.  It builds luxury, single-family detached and attached home communities; master planned luxury residential resort-style golf communities; and urban low, mid, and high-rise communities principally on the land it develops and improves.

The company operates its own architectural, engineering, mortgage, title, land development and land sale, golf course development and management, home security, landscape, cable TV, and broadband Internet delivery subsidiaries. Toll Brothers’ competitors include DR Horton Inc. (DHI), PulteGroup Inc. (PHM), Lennar Corp. (LEN), KB Home (KBH) and Hovnanian Enterprises Inc. (HOV).

D R HORTON INC (DHI): Free Stock Analysis Report

HOVNANIAN ENTRP (HOV): Free Stock Analysis Report

KB HOME (KBH): Free Stock Analysis Report

LENNAR CORP -A (LEN): Free Stock Analysis Report

PULTE GROUP ONC (PHM): Free Stock Analysis Report

TOLL BROTHERS (TOL): Free Stock Analysis Report

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