Luxury builder Toll Brothers Inc. reported stronger-than-expected quarterly orders and raised its sales expectations as tight supplies of existing homes fueled demand for new ones.
(Bloomberg) — Luxury builder Toll Brothers Inc. reported stronger-than-expected quarterly orders and raised its sales expectations as tight supplies of existing homes fueled demand for new ones.
- For the three months through July, purchase contracts rose 77% from a year earlier to 2,245, the company said in a statement Tuesday. The average estimate of 14 analysts in a Bloomberg survey was 2,064.
- Toll now expects to deliver 9,500 to 9,600 homes for its full fiscal year, up from its previous forecast of 8,900 to 9,500.
Key Insights
- Toll and other US builders have been magnets for shoppers unhappy with what they can find on the existing-home market. Generous incentives, such as mortgage rate buy-downs, have made purchases more affordable.
- Toll’s relatively wealthy customers are less likely to be held back by higher borrowing costs. In many cases, they’re able to plow profits from the sale of a previous house into the purchase of a new one.
- Boosting production of “spec homes” — started without a specific buyer in mind — has contributed to the company’s success, Chief Executive Officer Douglas Yearley said. The added supply has helped the company meet demand for deals that can close quickly.
- The company’s gross margin on home sales in the quarter was 27.8%, up from 26% a year earlier.
Market Reaction
- Toll’s shares rose in late trading. They had gained 52% this year through Tuesday’s close, compared with a 42% increase for an S&P index of US homebuilders.
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- The company will hold a conference call Wednesday at 8:30 a.m. New York time.
- Lean inventory and higher mortgage rates drove down sales of previously owned homes in July.
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