Toll Brothers Inc. (NYSE: TOL) reported fiscal second-quarter 2016 results before markets opened Tuesday. The luxury homebuilder posted quarterly diluted earnings per share (EPS) of $0.51 on revenues of $1.12 billion. In the same period a year ago, Toll Brothers reported EPS of $0.37 on revenue of $852.6 million. Second-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.46 and $1.04 billion in revenue.
The company has been able to bolster its average price for a delivered home from $713,500 in the second quarter a year ago to $855,500. The average price of net signed contracts slipped slightly year over year from $826,300 to $825,500. Toll Brothers delivered 1,304 units in the second quarter and reported 4,940 units in its backlog with an average price per home of $848,600.
Gross margin improved from 25.3% in the year-ago quarter to 25.7%.
CEO Douglas Yearley said:
Our revenues this quarter were up 31%, compared to last year while pre-tax income rose 62% and net income rose 31%. Improvements in gross margin, SG&A leverage and pre-tax margin contributed to a significant earnings jump this quarter. … Our contracts this quarter rose 3% in both dollars and units compared to one year ago. This modest growth was achieved despite a decline of 93 units in California contracts compared to one year ago. … Through the first three weeks of our third quarter, our contracts, on a gross basis, were basically flat compared to one year ago, while our non-binding reservation deposits were up about 25%.
Toll Brothers narrowed its guidance and now says the company expects to deliver between 5,800 and 6,300 new homes during its 2016 fiscal year at an average delivered price between $820,000 and $850,000.
The company’s chief financial officer also said Toll Brothers expects gross margin for the year to fall in a range of 25.8% to 26.2%.
The company’s executive chairman also noted:
We continue to believe the drivers are in place to sustain the current housing market’s slow but steady growth. Interest rates remain low, the job picture continues to improve, home equity values are rising, supply remains constrained and the industry is still not building enough homes to meet the demand that current demographics imply are needed.
Shares traded up about 3.7% in premarket trading Tuesday, at $28.12, in a 52-week range of $23.75 to $42.19.
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