Toll Brothers' quarterly revenue jumped nearly 31 percent, beating analysts' estimates, as the company sold more luxury homes at higher prices, mainly in California.
Shares of Toll Brothers, which mostly builds single-family homes that could cost more than $2 million, gained more than 8 percent on Tuesday.
New U.S. single-family home sales rose more than expected in April and the median price surged, suggesting the housing market recovery was gaining traction.
Toll Brothers' orders, a key metric of future revenue for homebuilders, increased 3.2 percent to 1,993 homes in the second quarter — a period well into the spring selling season, which is to homebuilders what the holiday shopping season is to retailers.
"We continue to believe the drivers are in place to sustain the current housing market's slow but steady growth," Executive Chairman Robert Toll said in a statement. "Interest rates remain low, the job picture continues to improve."
Other U.S. homebuilders such as Lennar, D.R. Horton, and PulteGroup have also reported strong quarterly results due to higher home sales.
Strong numbers
Toll Brothers said it now expected to sell 5,800 to 6,300 homes in the year ending Oct. 31. The company had earlier forecast homes sales of 5,700 to 6,400.
It also raised the lower end of its average selling price forecast for the year to $820,000 from $810,000, leaving the higher end unchanged at $850,000.
In the quarter ended April 30, Toll Brothers sold 1,304 homes at an average price of $855,500. This compared to 1,195 homes at $713,500, a year earlier.
The company said home sales in California soared 80 percent to 216. Sales in the West markets, which include Arizona, Colorado, Nevada and Washington, increased about 25 percent.
Orders in California, however, fell 25.3 percent, reflecting a temporary lack of inventory.
Its net income jumped 31 percent to $89.1 million, or 51 cents per share, beating the average analyst estimate of 46 cents per share, according to Thomson Reuters I/B/E/S.
Revenue rose for the third straight quarter to $1.12 billion, topping the average estimate of $1.04 billion.
Toll Brothers shares were trading at $27.65 before the bell.
Up to Monday's close, the stock had fallen about 19 percent this year, while the Dow Jones U.S. home construction index had declined 7.3 percent.
