Toll Brothers sees no end to home slump
Luxury home builder warns fourth quarter revenue, current year deliveries will miss forecasts, takes a hit from owned land.
NEW YORK (CNNMoney.com) -- Toll Brothers became the latest builder to cut guidance as its founder said he sees no end of the deep slump in home building.
"We continue to look for signs that a recovery is imminent but can't yet say that one is in sight," said a statement from company Chairman and CEO Robert Toll. "We see some signs of pent-up demand when we have special sales events or new community openings. And in some markets, good weeks are interspersed amongst weaker ones."
The builder of luxury homes reported preliminary results that showed revenue in the quarter ending Oct. 31 fell 10 percent to $1.81 billion, slightly below the $1.87 billion forecast of analysts surveyed by earnings tracker First Call.
The company also warned it will deliver 6,300 and 7,300 homes in the fiscal year that began last week. This compares to its previous guidance of 7,000 to 8,000 deliveries.
And it said that expects to take write-downs on optioned and owned land in the just completed quarter $50 million and $100 million, which will cut 18 to 36 cents a share off of net income. Final fourth-quarter and full fiscal year earnings and further guidance is due to be released December 5.
A big part of the weaker-than-expected results for the nation's No. 6 home builder was a jump in canceled orders.
The company said cancellations equaled 7 percent of beginning fourth-quarter backlog, compared to 4 percent in its backlog at the start of the third quarter. The cancellations also equaled 37 percent of the orders signed during the just completed quarter, compared to only 18 percent of those signed in the third quarter. The Orlando and Northern California markets accounted for one in four of the cancelled orders the builder saw in the quarter.
"It is worth noting that, atypically, this housing market is weak in an environment of low interest rates and low unemployment," said Robert Toll's statement. "We believe weak buyer confidence is keeping many customers on the sidelines."
Toll Brothers (Charts) is just the latest builder to warn of reduced earnings amid weaker demand. No. 1 builder Pulte Home (Charts), the No. 1 builder in terms of revenue, last month reported third quarter income that missed forecasts as it trimmed guidance for the current period well below the consensus estimate. No. 2 home builder Centex (Charts) also cut its guidance last month.
Shares of Toll Brothers were down about 2 percent in pre-market trading following the report, but the stocks of the other builders were either little changed or not trading as of 8 a.m.