Bloomberg reports that luxury home builder Toll Brothers had a larger than expected loss for the quarter.
Toll Brothers Inc., the largest U.S. luxury-home builder, reported a bigger-than-expected loss in the fourth quarter after revenue fell faster than costs. The shares dropped the most in a month.
The net loss for the three months ended Oct. 31 widened to $111 million, or 68 cents a share, from $79 million, or 49 cents, a year earlier, the Horsham, Pennsylvania-based company said today in a statement. Analysts surveyed by Bloomberg predicted a loss of 44 cents a share, according to the average of 11 estimates.
Like other homebuilders struggling to weather the housing crash, Toll has focused on selling properties in fewer communities, building up cash reserves and writing down the value of inventory to improve liquidity.
“Toll got order numbers up by slashing prices,” said Michael R. Widner, an analyst with Stifel Nicolaus & Co. Inc. in Baltimore. “The company’s not operating with a positive margin.”
Toll dropped as much as 5.5 percent to $18.42 in New York Stock Exchange composite trading, the most since Oct. 28. The stock was priced at $18.50 as of 10:21 a.m. local time. Toll was down 9.1 percent in the year through yesterday, making it the third-worst performer among 12 companies on the S&P Supercomposite Homebuilders Index.
Deliveries may fall by as much as 33 percent to 2,000 in the fiscal year through October 2010, Toll said. Average selling prices may fall as low as $540,000 and the cost of sales and administration will probably grow in 2010 from the current 18.3 percent of sales as the number of units sold falls, Toll said.
Too Bleak
Toll’s forecast paints an overly bleak picture, Carl Reichardt, an analyst with Wells Fargo Securities LLC in San Francisco, said in a note after the earnings release. The company is being “conservative” in its outlook, he said. He upgraded the stock to “outperform” from “market perform” on Nov. 11.
“We believe it may take some time for Americans to regain confidence in our economy, their job status and the benefits of home ownership,” Chief Executive Officer Robert Toll said in the statement. “Currently, we anticipate a gradual recovery in housing, similar to the one that occurred over several years coming out of the last recession in the early 1990s.”
New house construction in the U.S. has been hurt by increasing numbers of foreclosed properties coming onto the market. Two million homeowners who were paying their mortgage at the end of 2008 entered the foreclosure process in the first 10 months of this year, Lender Processing Services Inc. reported yesterday.
‘Wave of Foreclosures’
“Toll hasn’t talked about the wave of foreclosures coming its way,” Widner said. The analyst, who has a “sell” rating on the stock, said margins on home sales fell short of his forecast, a trend that could continue as more higher-priced homes enter foreclosure.
Fourth-quarter costs fell 23 percent to $592 million from a year earlier, while revenue declined 30 percent to $486.6 million. Toll wrote down the value of its property and work in progress by $85.5 million in the quarter, down from $176 million a year earlier.
Pretax profit excluding write downs and costs to pay off debt early, Toll had a quarterly loss of $9.6 million compared with a year-earlier profit of 69.9 million.
Toll’s new home orders rose 42 percent to 865 units in the fourth quarter and their value increased 62 percent to $430.8 million, the company said on Nov. 10. U.S. sales of new homes increased to an annual pace of 430,000 in October, a 6.2 percent rise from September, the Commerce Department reported on Nov. 25. Sales increased 5.1 percent from October 2008, the first year-on-year gain since November 2005.
The average value of a contract for a Toll Brothers home in the fourth quarter increased to $563,000 from $495,000 a year ago. That contrasts with the national average, which decreased to $212,200 in October, from $213,200 a year earlier, according to the Commerce Department.
