Toll Brothers (TOL), a luxury homebuilder, recorded a second quarter net income of $65.2 million, or $0.35 cents per share, compared to a net income of $24.7 million, or $0.14 cents per share for the same period a year prior.
This beat analyst forecasts of $0.26 cents, but according to Jay McCanless and Annie Worthman at Sterne Agee, without the benefit of a lower tax rate and other non-operating boosts, Toll Brothers would have missed the team's EPS estimate of $0.31 per share. Sterne Agee continues to rate the stock at an underperform with a $28 price target.
"Demand over the past year has been solid, although relatively flat, compared to the strong growth we initially experienced beginning in 2011, coming off the bottom of this housing cycle,” Douglas Yearley, Toll Brothers' CEO, said.
“We note that last cycle's recovery, in the early 1990's, began with a period of rapid acceleration, followed by leveling, before further upward momentum. We believe that we are in a similar leveling period in the early stages of the housing recovery with significant pent-up demand building," Yearley added.
As a result, Martin Connor, Toll Brothers' chief financial officer, said the company reaffirms its previous guidance that it will deliver between 5,100 and 5,850 homes in Fiscal Year 2014, that it expects to end FY 2014 with between 250 and 290 selling communities and that full year gross margin (after interest) will improve 175 to 200 basis points compared to FY 2013.
