Zacks_Analysts' Blog : Toll Brothers Beats Estimate - Analyst Blog

Toll Brothers Inc. (TOL) reported net income of $15.0 million or 9 cents per share during the fourth quarter of 2011 compared with $50.5 million or 30 cents per share in the year-ago quarter. Reported income in the quarter included a tax expense of $0.2 million versus a tax benefit of $59.9 million in the prior-year quarter.

Excluding the tax benefits and expenses, adjusted income in the quarter was $15.2 million or 9 cents per share, which was higher than the Zacks Consensus Estimate of 4 cents per share as well as the adjusted loss of $9.4 million or 6 cents per share.

Fourth quarter pre-tax income was $33.9 million (excluding write-downs and debt retirement charges of $18.2 million and $0.4 million, respectively) compared with $18.1 million (excluding write-downs and debt retirement charges of $27.0 million and $0.5 million, respectively) in the year-ago quarter.

Revenues increased 6% year over year to $427.8 million, driven by an 8% growth in home deliveries to 757 units.  The demand for luxury homes declined in the reported quarter due to poor industry conditions and subdued confidence among luxury homebuyers. At year end, the company’s total selling communities amounted to 215 versus 195 at the end of the prior year.

The company signed gross contracts worth $421.4 million in the quarter compared with $345.3 million in the prior year. The average price per unit of gross contracts signed was approximately $603,000 compared with $564,000 last year. Total value of net contracts signed amounted to $390.0 million at an average price of $606,000 versus $315.3 million of net contracts at an average price of $565,000 in the previous year.

The company’s total backlog at the end of the quarter totaled 1,667 homes (valued at $981.1 billion) compared with 1,494 units (valued at $852.1 million) a year ago. Cancellation rate fell to 3.1% in the quarter from 3.3% in the year-ago quarter.

Toll Brothers ended the quarter with lower cash balance. The company had cash and cash equivalents of $1.16 billion as of October 31, 2011 compared with $1.30 billion as of October 31, 2010. Inventories stood at $3.42 billion at October 31, 2011 compared to $3.24 billion as of October 31, 2010.

The company expects to deliver 2,400 to 3,200 homes in fiscal 2012 at an average price range of $550,000 to $575,000. Total selling communities are projected between 235 and 255.

Toll Brothers’ full-year net income amounted to $39.8 million or 24 cents per share compared with a net loss of $3.4 million or 2 cents per share in fiscal 2010. Pre-tax income was $67.2 million versus a pre-tax loss of $0.7 million last year, excluding inventory and joint venture write-downs and debt retirement charges.

However, revenues inched down 1% year over year in fiscal 2011 to $1.48 billion, driven by a 1% decline in home deliveries to 2,611 units.

Based in Horsham, Pennsylvania, Toll Brothers, a Zacks #3 Rank (Hold rating) stock, 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).