Luxury homebuilder Toll Brothers earns $27.3 million in 3rd quarter, reversing loss

Toll Brothers posts profit for 3rd quarter

LOS ANGELES — Toll Brothers Inc. on Wednesday posted a fiscal third-quarter profit, but the luxury homebuilder said fewer buyers signed contracts, another sign that housing and the broader economy are stumbling.

After an initial pickup in deposits and customer traffic in the first few weeks of May, buyer demand retreated and has remained essentially flat ever since, the company said.

Management blamed weak flagging consumer confidence, not a demand hangover from homebuyer tax credits that expired in April.

“It’s continued to be very bumpy and relatively slow, and where we go from here, we don’t know,” said CEO Douglas Yearley. “Our buyers tend to be very tied to stock market, to world events, to their confidence. And right now they’re on the sidelines.”

Home sales revived this spring as affordable prices, low mortgage rates and two federal tax credits lured homebuyers into the market. But they stalled after the credits expired at the end of April.

New home sales dropped 12.4 percent in July to the slowest pace on records dating back to 1963, the Commerce Department said Wednesday. And the number of borrowers who applied for a purchase mortgage this week remains 41.5 percent below its April levels, the Mortgage Bankers Association reported.

Now a weakening economy, high unemployment, slow job growth and tight credit are sidelining buyers and many experts don’t expect home sales to recover until the job market improves.

Bob Toll, the company’s executive chairman, said would-be buyers are postponing their decision to purchase a home, but that could result in pent-up demand that could emerge when the recovery takes hold.

For now, the builder projects completed sales in its fiscal fourth quarter to be weaker than in the same period last year. It also anticipates fiscal 2010 completed sales to range between 2,500 and 2,700 homes. That estimate falls below the 2,965 completed sales the builder posted in fiscal 2009.

The Horsham, Pa.-based company earned $27.3 million, or 16 cents per share, for the quarter that ended in late July, mostly on tax credits and fewer write-downs. That compares with a loss of $472.3 million, or $2.93 a share, last year.

Excluding one-time charges, Toll’s pretax adjusted income more than tripled to $13.3 million.

Analysts polled by Thomson Reuters expected the homebuilder to lose 14 cents a share.

However, the company’s new orders dropped 16 percent in the quarter to 701 units and the value of those units fell 11 percent to $400.1 million dollars.

Toll’s revenue for the quarter slipped to $454.2 million from $461.4 million the year before. Analysts expected revenue of $396.4 million.

New contracts fell across all of Toll’s markets, led by a 32 percent drop in the South. The Mid-Atlantic market posted the smallest decline at 9.3 percent. Management noted the value of new contracts at several of its high-rise projects in New York City more than doubled from a year ago to $38.5 million.

Yearley said sales at the high-rise projects have been spectacular over the past few months and the builder has been reducing its buyer incentives.

The builder had 19 percent fewer open communities than in the same quarter last year. It operates in 20 states and is the nation’s largest builder of luxury homes.

Cancelations fell to 6.2 percent from 8.5 percent in the prior-year quarter, but they increased from 5.3 percent in the second quarter.

The average price of Toll’s net new home contracts during the quarter was $571,000, up from $535,000 in the prior-year period and ahead of $567,000 in the second quarter.

Shares of Toll Brothers added 95 cents, or 5.9 percent, to $17.14 in afternoon trading.

Online:

Toll Brothers: www.tollbrothers.com