Has Toll Brothers Crossed the Desert?

Homebuilder Toll Brothers (NYSE:TOL) has returned to happier days of order backlogs for homes and a quarterly profit.

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Home deliveries in the second quarter rose to 671 units, from 591 units, with net signed contracts increasing to 1,290 units, from 879 units, and backlog rising to 2,403 units, from 1,760 units.

Earnings were $16.9 million (10 cents a share) compared to a loss of $20.8 million (12 cents a share) in the previous period. The performance handily beat analysts’ expectations of 3 cents a share. The results adjusted for an inventory write-off of $2 million, a $1.6 million recovery of previous joint venture impairments, and a $1.2 million tax benefit.

Revenues were up 17 percent to $373.7 million, and missed analysts’ estimate of $381 million.

“In some locations, it is no longer a buyer’s market; in a few locations it’s even a seller’s market,” said Executive Chairman Robert Toll. “We would like to say ‘We’re back’, but we need a little more confirmation: Nonetheless, it sure feels good, compared to the desert we’ve just crossed.”

In an interesting insight into the housing market, Chief Executive Douglas Yearley commented that Toll was seeing the benefits of five years of pent-up demand and a reduction of competition in the luxury housing market, the main business of the company.

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