TOLL Brothers: 'Glimmers of Hope'
By Scott Rothbort
RealMoney Contributor
2/27/2008 7:04 PM EST
Toll Brothers traded lower early in the session but seemed to catch a bid on the OFHEO cap removal.
Robert Toll, who is normally open, honest and ebullient, was rather somber in his assessment of the markets. At the same time, he did offer some "glimmers of hope" from some of the markets that were first to head south.
I think that the turn in the housing market, if it is to come, will become evident in the March-June period, which is peak selling season. Until then, I think that any capital committed to the group is speculative, and tight stops should be used.
Earnings Release and Conference Call
Toll Brothers reported a first-quarter loss of 61 cents per share on revenue of $843 million. Included in these results were pre-tax writedowns of $246 million for land impairments. On an after-tax basis, these impairments were a net charge of 93 cents to earnings. Excluding the impairments, TOL would have earned 35 cents. Excluding writedowns, TOL earned 72 cents in the year-ago period.
There were 904 new-home contracts (-38% YOY) signed during the quarter, for a delivery value of $573 million (-46% YOY). TOL incurred 257 cancellations totaling $198 million of contracts vs. 436 cancellations for $319 million a year ago. ASPs for contracts signed were $634,000, vs. $646,000 a year ago with the decline attributed to product mix.
Robert Toll categorized the selling season beginning in mid-January as weak for the third consecutive year. He sees "few glimmers of hope." However, there is improvement in Naples, Fla., where through late 2007 he said you could not give a home away. In metro Washington, D.C. there was a glimmer of hope, which faded in the past but perhaps it will not this time around.
Cost of sales was 74.6% vs. 71.1% in the year-ago quarter and 73.7% in the sequential quarter. The rise in costs was attributed to product mix and incentives. Interest expense rose 30 basis points sequentially due to lower inventory turns. SG&A was 14.4% of revenue vs. 12.3% in the first quarter of 2007.
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