Toll Brothers Continues to Build Momentum

Homebuilders received support across the board on Tuesday, after Pennsylvania-based Toll Brothers (NYSE:TOL) reported better-than-expected financial results for the fiscal fourth quarter.

How Good Are the Earnings?

The luxury-homebuilder said net income came in at $411.4 million ($2.35 per share) for the three months ended October 31, compared to only $15 million (9 cents per share) in the same period last year. Although earnings included a net tax benefit of $350.7 million, which included the reversal of deferred tax assets, revenue surged 48 percent to $632.8 million. Analysts on Wall Street expected earnings of only 24 cents per share, with revenue of $566 million.

Net signed contracts jumped 75 percent in dollar terms to $684.1 million, while the number of contracts gained 70 percent to almost 1,100 units. On a per-community basis, the fourth quarter’s net signed contracts of 4.86 units per community were the highest for any fourth quarter since 2005.

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Douglas C. Yearley, Jr., Toll Brothers CEO, explained, “Pent-up demand, rising home prices, low interest rates, and improving consumer confidence motivated buyers to return to the housing market in FY 2012. As household formations accelerated and unsold home inventories dropped to record lows, the industry took further steps toward a sustained housing recovery. We enjoyed resurgent activity across all of our product lines and in most of our geographic regions. The momentum that began in our first quarter of FY 2012 built throughout the year.”

It has been a good year for investors in homebuilders…