Toll Brothers Posts Quarterly Home Orders Beating Estimates

(Bloomberg) -- Toll Brothers Inc., the largest U.S. luxury-home builder, reported quarterly orders that beat estimates, a sign that low mortgage rates are fueling a rebound that includes pricey properties.

• For the three months through October, purchase agreements rose 18% from a year earlier to 2,031 homes, the company said in a statement Monday. Orders were expected to climb 9.6%, based on a Bloomberg survey of analysts. The company also beat estimates on revenue and profit.

Key Insights

• The homebuilder, which has primarily focused on higher-priced homes, is getting a boost from a push into cheaper frontiers where sales are less hampered by an affordability crisis. A few months ago, Toll announced its expansion into South Carolina’s Charleston, Greenville and Myrtle Beach markets through its acquisition of Sabal Homes, whose properties start below $300,000.
• Toll benefited from an easy comparison to its results from a year ago, when a plunge in California dragged down its overall orders. The slowdown in the costly state, which is suffering from a lack of affordable housing, has cut into Toll’s gross profit margin, which shrunk to 18.8% in the quarter from 21.4% a year earlier.
• Toll’s focus on expensive homes puts it at a disadvantage to competitors that offer affordability. The luxury market is a difficult niche now that global economic uncertainties are weighing on the minds of the rich while low mortgage rates fuel demand for cheaper properties that are in short supply.

Market Reaction

• Toll shares rose as much as 4.7% in late trading before paring the gains. The stock, which has climbed 26% this year, is the worst performer in an S&P index of homebuilders, which is up 58%.

Get More

• Click here to read Toll’s earnings statement.

To contact the reporter on this story: Prashant Gopal in Boston at pgopal2@bloomberg.net

To contact the editors responsible for this story: Craig Giammona at cgiammona@bloomberg.net, Christine Maurus

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