Toll Brothers Fourth-Quarter Profit Falls
Toll Brothers, a builder of luxury homes, said fourth-quarter earnings fell amid continuing softness in some of the once-hottest U.S. housing markets.
For the fiscal fourth quarter ended October 31, Toll reported net income of $173.8 million, or $1.07 a share, down from $310.3 million, or $1.84 a share, a year ago.
Revenue fell to $1.81 million from $2.02 million, while backlogs shrank to $4.49 billion at the end of the quarter, compared with a backlog of $6.01 billion a year ago.
Analysts had expected Toll to report fourth-quarter profit of $1.06.
Toll also said it expects 2007 full-year earnings to fall about 62% to a range $1.58 to $2.08 a share, which includes a change in accounting treatment and larger land-related write-downs than expected.
Although Toll Brothers is forecasting a steep decline in earnings next year, the company said it may be seeing "a floor" in some markets where deposits and traffic, although "erratic" from week to week, seem to be "dancing on the bottom or slightly above."
"The fundamentals that typically lead our industry out of a slowdown are already in place," said Chairman and Chief Executive Robert Toll, in a written statement. "Interest rates are near historic lows, unemployment is near an all-time low and the stock market is setting records."
Still, in the near-term, Toll Brothers continues to face margin pressure due to cancelled orders. In the latest period, the company 585 cancellations, which is higher than normal.
"I think the luxury end of the market is probably going to be the last to see a bottom in the housing market," said Alex Barron, a homebuilding analyst at JMP Securities, on CNBC's "Squawk Box."
"I would be more comfortable if I started to hear companies focused on the low end starting saying similar comments," Barron said.
According to Toll, some of the markets that were the first to slow down are the ones that are picking up again. This includes the metro Washington, D.C., suburbs of northern Virginia, which appear to have stabilized. In Washington, D.C.'s Maryland suburbs the market appears to be nearing stablization.