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Toll Brothers' Earnings: What Wall Street's Saying

Tickers in this article: TOL

NEW YORK (TheStreet) -- Toll Brothers's fiscal-third quarter results came in above Wall Street expectations, but analysts were concerned about the luxury homebuilder's future orders.

Shares were down 2.9% to $34.60 on Wednesday.

Toll reported fiscal third-quarter profit of $97.7 million, or 53 cents a share, up from a year-earlier $46.6 million, or 26 cents a share. Toll, the largest U.S. luxury homebuilder, said revenue rose 53% to $1.06 billion after selling 1,444 homes in the third quarter compared with 1,059 a year earlier. Toll said the average selling price rose 12% to $732,000 compared to $651,000 in the year-earlier quarter.

Net signed contracts of 1,324 units decreased 6% from last year. On a per-community basis, though, the quarter's net signed contracts of 5.25 units "was the second highest per-community third quarter total since FY 2006," the company said.

Consensus called for the Horsham, Pa.-based company to earn a quarterly profit of 45 cents a share on revenue of $987.2 million.

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Here's what analysts are saying about Toll Brothers.

Eli Hackel, Goldman Sachs (Neutral; price target under review)

While the results beat ours and Street estimates, we are concerned by the weakness shown in new orders (decline of -5.8% yoy vs. our estimate of +11.3%), and community count (-16.5% vs. our estimate of -2.3%). Management revised FY14 estimates and now the community count guidance mid-point goes down to 265 communities (from 270 communities earlier) while the deliveries guidance mid-point goes to 5,400 from 5,475 earlier. Gross margins guidance improved to 185 - 200bps yoy growth from 175-200bps earlier.

August trends showed absorptions down 19% but non-binding deposits per community is up 4%. We are not yet willing to read too much into this given this is a slower seasonal time and it would indicate orders may not turn positive until October potentially. In addition, management commentary was reserved. That being said if absorptions stay positive, the trajectory heading into the end of the year could be better than our initial estimates as we currently model absorptions down through the year.

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