Toll Brothers Q3 Net Drops 85%, But Beats Estimates; To Cut Production

Toll Brothers reported an 85% drop in Q3 net income to $26.5 million, or $0.16/share, on a 21% decline in revenues to $1.21B. Analysts were expecting -$0.02/share on sales of $1.15B, on average. Toll wrote down $147.3M for land, developments and options. Excluding the write downs, Toll earned $0.70/share. Toll said signed contracts totaled $727M, a 31% y/y decline. Cancellations increased 4.9% y/y to 23.8%, a "quite elevated" level, but at the low end range compared to competitors, according to CEO Robert Toll. In a press release, CEO Toll said, "We believe that our buyers generally should be able to continue to secure mortgages, due to their typically lower loan-to-value ratios and attractive credit profiles." Toll commented further that "Once equilibrium is achieved, we believe home prices will firm and customers, who are waiting on the sidelines, will have the confidence to enter the market." The company is curtailing building to 305 communities by the end of this quarter (vs. 325 in May). Shares of Toll were last up 5.2% to $22.20 in thin pre-market trading, after falling 4.2% to $21.09 on Tuesday.

Sources: Press release, Bloomberg, MarketWatch
Commentary: Bank of America Downgrades Three Homebuilders: A Look At Past Calls • Toll Bros. Forecasts Another Brutal Quarter • Housing Bubble and Real Estate Market Tracker
Stocks/ETFs to watch: TOL. Competitors: DHI, CTX, PHM. ETFs: XHB
Conference call transcripts: Toll Brothers F3Q07 Preliminary Earnings Call Transcript

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