Toll Brothers - Yet Another Sign Of Growth In Real Estate

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Rubicon Associates

Real estate put another notch in its belt today with the earnings release by Toll Brothers (NYSE:TOL).

From the release:

  • FY 2012 second-quarter net income of $16.9 million, or $0.10 per share, compared to a FY 2011 second-quarter net loss of $20.8 million, or $0.12 per share.
  • FY 2012's second-quarter results included $2.0 million of pre-tax inventory write-downs and a $1.6 million recovery of prior joint venture impairments, compared to FY 2011's second quarter pre-tax write-downs and joint venture impairments totaling $32.5 million.

As the market recovers, previous impairments will be written back up, supporting earnings (not recurring in nature, but helpful). This, in itself, is showing a gradual recovery in real estate as values are being written up.

FY 2012's second-quarter net signed contracts of $754.7 million and 1,290 units rose 51% in dollars and 47% in units, compared to FY 2011's second-quarter net signed contracts of $500.9 million and 879 units. The average price of FY 2012's second-quarter net signed contracts was $585,000. On a per-community basis, FY 2012's second-quarter net signed contracts of 5.61 units per community were the highest for any second quarter since FY 2006.

Again, an increase of 51% in the value of net signed contracts and 47% in units is impressive, net signed contracts of 5.61 units per community supports this.

Toll Brothers ended FY 2012's second quarter with 230 selling communities, compared to 203 at FY 2011's second-quarter end. The Company now expects to end FY 2012 with between 230 and 245 selling communities, a slight decrease from its previous range of guidance: This is attributable to the faster sell-out of certain communities than previously projected due to stronger demand.

Keep in mind, these are higher priced homes. If these are selling, we can extrapolate that mid-priced homes are selling as well.

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Rubicon Associates is headed by a Chartered Financial Analyst charter holder with over 20 years of experience in the investment management industry focused on the analysis, investment and management of fixed income and preferred stock portfolios. Over the years, he has analyzed and invested in both public and private companies around the world as well as advised institutional clients on fixed income strategies and manager selection. The principal has been responsible for managing nearly seven billion dollars in credit investments across the capital structure and overseeing the research and trading of credit market activities. Rubicon Associates has written for Seeking Alpha, Learn Bonds, a newsletter and in addition to advising institutional and private investors.

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