Toll Brothers sold more homes at higher prices, boosting quarterly revenue 53 percent. But orders fell. Fred Katayama reports.
The recovery in the U.S. housing market has been uneven, but Toll is mostly on a roll. The biggest builder of luxury housing more than doubled its quarterly profit. Toll Brothers charged higher prices for its homes, and it sold a lot more of them, unlike D.R. Horton, which resorted to discounting to sell to its roster of mostly first-time buyers. Toll's wealthier customers aren't impacted by the rise in interest rates and home prices as much as D.R.'s customers are. Toll's revenue shot up 53 percent, and it said it saw the traffic improvement continuing into August. But it didn't exactly score a home run. Orders fell, especially in the South and Mid-Atlantic regions, contrary to analysts' forecasts calling for a big increase. One analyst said it appears Toll is choosing to boost its profit margins over volume. Toll's stock fell in early trading, adding to its nearly 4 percent loss this year. Sterne Agee wasn't impressed by Toll's performance, reiterating its underperform rating. Analyst Jay McCanless said: "Order growth was below our assumptions. We view the shares as fully valued at current levels."