Moody’s Investors Service (MCO) upgraded its ratings outlook for Toll Brothers (TOL) this week in light of the home builder’s ability to cut its fiscal second-quarter loss in half. The ratings agency moved its Toll Brothers outlook from negative to stable, saying the change “reflects the company’s ability to generate improving operating results and credit metrics” even as the home building industry continues to struggle in an anemic housing market. Toll Brothers recently reported a loss of $20.8 million, or 12 cents a share, for the three months ended April 30, narrower than the loss of $40.4 million, or 24 cents a share, a year earlier. Second-quarter revenue rose 2.7% to $319.7 million from $311.3 million last year. Toll Brothers has consistently increased its gross margins and became one of a few builders to generate income in the aftermath of the housing crunch, Moody’s said. Between the first quarter of 2010 and the 1Q of 2011, the builder grew its gross margins from 13.8% to 18%. In addition, Moody’s affirmed its Ba1 corporate family rating, Ba1 probability of default rating and the Ba1 senior unsecured debt rating on Friday. Write to Kerri Panchuk.

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