Toll Brothers Inc. (TOL) reported a net loss of $20.8 million or 12 cents per share during the second quarter of fiscal 2011 compared with a net loss of $40.4 million or 24 cents per share a year ago. However, excluding a tax benefit of $10.7 million, net loss was $31.5 million or 19 cents per share, much higher than the Zacks Consensus Estimate of a loss of 5 cents per share.
Adjusted pre-tax income was $1.0 million compared with a pre-tax loss of $9.5 million last year. Revenues rose 3% year over year to $319.7 million, driven by a 3% increase in deliveries. However, revenues missed the Zacks Consensus Estimate of $322 million. Home deliveries in the quarter totaled 591 units, up 9% from 543 units reported in the prior year. The demand for luxury homes improved in the quarter driven by improved confidence among luxury homebuyers.
The company signed gross contracts worth $521.1 million in the quarter compared with $489.4 million in the prior year. The average price per unit of gross contracts signed was approximately $570,000 compared with $565,000 last year. Total value of net contracts signed amounted to $500.9 million, with an average price of $570,000 versus $464.6 million of net contracts with an average price of $570,000 in the previous year.
The company’s total backlog at the end of the quarter totaled 1,760 homes (valued at $1.01 billion) compared with 1,738 units (valued at $993.5 million) a year ago. Cancellation rate dropped to 3.9% this year from 5.3% last year. Total selling communities were 203 versus 190 in the prior year.
Toll Brothers ended the quarter with lower cash balance. The company had cash and cash equivalents of $950 million as of April 30, 2011 compared with $1.04 billion as of October 31, 2011. Net-debt-to-capital ratio improved to 13.6% from 16.2% at the end of second quarter of fiscal 2010.
The company expects to deliver 2,300 to 2,800 homes in fiscal 2011 at an average price of $540,000 to $560,000. Total selling communities is projected between 215 and 225.
A depressed housing industry is the biggest concern for any homebuilder including Toll Brothers. Besides, there is no sign of a speedy recovery. Thus, a poor performance in terms of housing is very likely for the company. However, Toll Brothers continuous efforts to fight the situation and minimize its loss as much as possible are worth mentioning. The company’s aggressive purchase of lots is aimed at fully utilizing the growing demand once the pace of recovery gains momentum.
Hence, the company retains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating.
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