Toll Brothers shares surge as luxury builder reports 30% profit rise

Getty Images

Shares of Toll Brothers rose as much as 15% on Tuesday as the luxury home builder reported a better-than-forecast 30% increase in net profit.

Toll Brothers TOL, +13.79%  reported net income of $193.3 million, or $1.26 a share, for the fiscal third-quarter ending July 31, topping the FactSet-compiled analyst estimate of $1.03 a share. Revenue growth of 27% to $1.91 billion also beat broker estimates, which were $1.81 billion.

Analysts at Susquehanna said there were several one-time items that made Toll’s “core” earnings more like $1.20 a share.

The company said it benefited from the health of the new-home industry generally as well as its position in the luxury market.

The company said its 8.1 signed contracts per community were the strongest for a fiscal third quarter in a decade.

California home-building revenue surged 82% in the third quarter.

Compared with one year ago, its backlog in California was up 55% in value at third-quarter end.

“While California is not as hot as a year ago, it is still one of our stronger markets,” CEO Douglas Yearley Jr. said in a statement.

The company also reported 2,316 orders, above the 2,291 consensus. It is forecasting fiscal year revenue between $6.76 billion and $7.22 billion, compared to the FactSet estimate of $7.02 billion.

For the year, Toll Brothers expects its average price to be between $835,000 and $860,000; the typical new home in the U.S. sold for $302,100 in June, the Commerce Department reports.

On a conference call, executives pointed out the company will benefit next year from lower lumber prices, but that those cost decreases may be paired with higher labor expenses.

Even with Tuesday’s stellar gains, the stock is still down nearly 18% this year. The S&P 500 SPX, +0.21% is up about 7% in the same period.