Toll Brothers, the #1 U.S. luxury homebuilder, said this morning Q1 2007 profits fell 67% from $163.9 million to $54.3m on a 19% drop in revenues from $1.34 billion to $1.09b. EPS were $0.33 vs. $0.98 in Q1 2006, beating analyst estimates of $0.29. The results include land write-downs of $59m and goodwill impairment of $5m (net of which EPS was $0.72, down 27%). In its preliminary earnings on Feb. 8, Toll Bros. said it expected writedowns of up to $160m. For the rest of 2007, the company said it expects to deliver 6,000-7,000 homes, resulting in homebuilding revenues of $4.2-$4.95b -- down from its previous forecast of 6,300-7,300 homes which was itself reduced. It gave 2007 earnings guidance of $1.46-1.85/share, including predicted $60m writedowns in Q2 and Q3. Earlier guidance was for $1.58-2.08/share, down from $4.17 in 2006. CEO Robert Toll: "There are too many soft markets at this stage of the selling season to call a general upturn in the new home market... We believe that pent-up demand is building in many markets as potential buyers bide their time until they are confident prices have firmed."
Sources: Press Release, Wall Street Journal, Bloomberg
Commentary: Has the Homebuilder Rally Run its Course? • For Whom the Bell Tolls: Perchance for a Home-Builder? • Toll Brothers Earnings Conference Call Transcript (later today) • Toll Brothers F1Q07 Preliminary Earnings Results Call Transcript
Stocks/ETFs to watch: Toll Brothers Inc. (NYSE:TOL). Competitors: KB Home (NYSE:KBH), D.R. Horton Inc. (NYSE:DHI), Pulte Homes Inc. (NYSE:PHM), Hovnanian Enterprises Inc. (NYSE:HOV), Beazer Homes USA Inc. (NYSE:BZH), Centex Corp. (CTX), Lennar Corp. (NYSE:LEN). ETFs: streetTRACKS SPDR Homebuilders ETF (NYSEARCA:XHB), iShares Dow Jones U.S. Home Construction (NYSEARCA:ITB), PowerShares Dynamic Building & Construction (NYSEARCA:PKB)
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