SEATTLE (Reuters) - Luxury homebuilder Toll Brothers Inc said on Tuesday said it expected fourth quarter revenue to drop 30 percent, but blew past Wall Street's expectations by nearly $100 million, and the company's shares rose 5.4 percent in after-hours trading.
In a positive indication for the housing market, Toll Brothers also said preliminary results for the quarter ended October 31 showed fourth-quarter net contracts rose 42 percent to 765 units, or 62 percent to $430.8 million.
The broader U.S. housing market has shown some signs of stabilization recently, such as the increase in the sales of existing homes.
The summer months saw the housing market, including both resale and new homes, get a boost from a $8,000 federal tax credit for first-time home buyers.
"We have definitely progressed from one year ago," Robert Toll, the company's chief executive officer said in a statement. "The shock to the financial system in mid-September 2008 that shut down the capital markets appears to be mostly behind us."
Toll Brothers expects total consolidated homebuilding revenue of about $486.6 million for the fourth quarter, down from $691.1 million a year earlier.
Analysts, on average, expected revenues of $386.2 million, according to Thomson Reuters I/B/E/S.
The contract cancellation rate was 6.9 percent in the quarter, the lowest since the fourth quarter of fiscal 2005 and in line with historical averages from before the economic downturn, the company said.
Toll cautioned that, although signs such as better consumer confidence, the increasing stabilization of home prices and the decline in unsold home inventories suggest the new home market should be improving, it would happen "slowly and through choppy waters."
The company has no public debt maturing before fiscal 2013 and expects a charge of $11.6 million for the fourth quarter tied to early retirement of debt, the company said.
The extension of home buyer tax credit and broader eligibility, beyond first time home buyers, should help attract hesitant consumers into the market, Toll Brothers said.
Toll Brothers' shares rose 5.4 percent to $19.38 after the bell from their close of $18.39 on the New York Stock Exchange.
(Reporting by Aarthi Sivaraman; editing by Andre Grenon)