Toll Brothers Inc., the largest U.S. luxury home builder, Thursday posted a stronger-than-expected 49 percent rise in quarterly profit, sending its shares higher.
However, Toll is seen as a bellwether for the U.S. housing market, and the company’s sharp drop in new home orders in the quarter may indicate overall demand is slowing.
Chief Executive Robert Toll said in a statement that speculative buying had propelled demand for new homes to unsustainable levels in many markets last year.
“We are now on the other side of that slope,” he said. ”Speculative demand has ceased, and speculators are now putting their homes back on the market. The result has been more supply than demand in some regions.”
Net income rose to $163.9 million, or 98 cents a share, in the first quarter ended Jan. 31, compared with $110.2 million or 66 cents per share, a year earlier. That was 6 cents higher than analysts had expected, according to Reuters Estimates.
Revenue rose 35 percent to $1.34 billion, topping the analysts’ average estimate of $1.33 billion. Given that Toll homes take an average 11 months from order to completion, the revenue figure reflects orders from early last year.
As reported earlier this month, first-quarter new orders fell 29 percent to 2,209, including unconsolidated entities, while the value of the contracts fell 21 percent.
Toll said it expected fiscal 2006 net income of $4.77 to $5.26 a share. The midpoint of that range is slightly above the $4.98 analysts had projected after revising down an earlier forecast of $5.17.
Earlier in February, Toll slashed its sales forecast for the second time in three months. It said it saw fiscal 2006 sales of between 9,200 and 9,900 homes, down from the previously lowered view of 9,500 to 10,200.
The Horsham, Pennsylvania-based company also affirmed it ended the quarter with a backlog of 8,635 homes contracted and awaiting construction at a value of $5.95 billion, up 22 percent.
Robert Toll said the company remained open to stock repurchases and other opportunities to increase shareholder value.