[Update 1: Corrects cancellation figures to compare second quarter 2012 to 2Q 2011]
Luxury homebuilder Toll Brothers Inc. (TOL) returned to a profit in the second quarter with net income of $16.9 million, or 10 cents a share, thanks to increased confidence in the market and fewer cancellations.
The Horsham, Pa. – based homebuilder posted a loss of $20.8 million in the year-ago period, or a loss of 12 cents a share. The company also posted a first-quarter 2012 loss of $2.8 million, or 2 cents a share.
Last quarter’s losses, the hightest for any first quarter in five years, were largely a surprise, and the company reported the losses were due to fewer deliveries and increased cancellations. This quarter’s improvement comes as Toll Brothers reports greater recovery in Florida and in Phoenix, two of the hardest hit areas.
"It appears that the housing market has moved into a new and stronger phase of recovery as we have experienced broad-based improvement across most of our regions over the past six months," said Chief Executive Douglas C. Yearley Jr. "Spring selling season has been the most robust and sustained since the downturn began.”
Analysts polled by Thomson Reuters had forecast earnings of 4 cents.
Toll Brothers delivered 671 homes in the quarter ending April 30, up 14% from 591 a year earlier. Backlog was at 2,403 units from 1,760 units from last year. Net signed contracts also jumped significantly, up 47% to 1,290 homes. The average price of those contracts was $585,000 up from $570,000 year-over-year. The cancellation rate, which is defined as cancellations divided by signed contracts, dropped to 2.4% from 3.9% in 2Q 2011.
FY 2012's second-quarter results included $2 million of pre-tax inventory write-downs and a $1.6 million recovery of prior joint venture impairments, compared to FY 2011's second quarter pre-tax write-downs and joint venture impairments totaling $32.5 million. Revenue increased 6.4% to $695.6 million.
Toll Brothers’ stock has risen 32% so far in 2012, and closed Tuesday at $27.03.