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Leading luxury homebuilder Toll Brothers reported better than expected first-quarter earnings Wednesday. The stock $TOL rose over 9% on the report after being up over 9% earlier, up 18% on the day on hopes of recovery. Home sales revenues were $1.52 billion, down 11%

Toll Brothers

Toll Brothers Inc NYSE: TOL Reported Earnings After Close Wednesday

$0.59 Beat $0.44 EPS AND $1.52Billion Beat $1.51 Billion Revenue Forecast

Earnings

Toll Brothers reported first-quarter earnings of per share were $75.7 million and $0.59 per share diluted, compared to net income of $129.3 million and $0.87 per share diluted in FY 2019’s second quarter. Pre-tax income was $102.1 million, compared to $176.2 million in FY 2019’s second quarter. Home sales revenues were $1.52 billion, down 11%; home building deliveries were 1,923, up 1%.

Toll Brothers was expected to report fiscal second-quarter earnings of 44 cents per share on $1.51 billion in revenue, according to analysts polled by Bloomberg

 

Toll Brothers Inc NYSE: TOL

Reaction After hours 36.00 +3.00 (9.09%)

After Closing $33.00 +2.87 (+9.53%) = over +18% on Day

Highlights

Douglas C. Yearley, Jr., chairman and chief executive officer, stated:

“We are pleased with our performance in the second quarter as our team delivered solid results under very challenging conditions. Our second quarter was essentially bifurcated by the impact of Covid-19. Fueled by strong demand, a healthy economy, low mortgage rates, and a limited supply of new and existing homes nationwide, our net signed contracts were up 43% through the six weeks ended March 15, 2020, compared to the prior year’s same period. With approximately 40% of our selling communities and 50% of the dollar value of our backlog concentrated in highly impacted markets, from March 16 through April 30, our net signed contracts declined 64% year over year. Government stay-at-home and business closure orders in these markets, which included Pennsylvania; New Jersey; New York City and its suburbs; Connecticut; Massachusetts; Michigan; metro Seattle and California, made it especially challenging to sell, construct and deliver homes. Fortunately, government restrictions have eased and sales and construction operations have resumed in almost all of our markets.

Toll Brothers operates under two segments

  1. Traditional Home Building
  2. Urban Infill ("City Living").
  • Net signed contract units were 1,886, down 22%; contract value was $1.55 billion, down 22%.
  • Backlog in units at second-quarter end was 6,428, down 1%; backlog value was $5.49 billion, down 3%.
  • Home sales gross margin was 17.5%; Adjusted Home Sales Gross Margin, which excludes interest and inventory write-downs (“Adjusted Home Sales Gross Margin”), was 21.0%.
  • Pre-tax inventory write-downs totaled $14.2 million. SG&A, as a percentage of home sales revenues, was 11.8%.
  • During the quarter, the Company undertook a number of cost reduction initiatives to improve efficiencies and rationalize overhead expenses, including workforce reductions.
  • The Company expects these actions will decrease overhead expenses by approximately $50 million on an annualized basis, with approximately $25 million of savings in the remainder of fiscal 2020. Income from operations was $92.5 million.
  • Other income, income from unconsolidated entities, and land sales gross profit was $16.0 million.

Additional Financial Information:

  • The Company ended its FY 2020 second quarter with $741.2 million in cash and cash equivalents, compared to $1.29 billion at FYE 2019 and $519.8 million at FY 2020’s first-quarter end.
  • At FY 2020 second-quarter end, the Company also had $1.29 billion available under its $1.905 billion bank revolving credit facility.
  • During the first half of the second quarter of FY 2020, the Company repurchased approximately 4.3 million shares at an average price per share of $37.05, for an aggregate purchase price of approximately $157.5 million, representing 3% of shares outstanding as of FYE 2019.
  • On April 24, 2020, the Company paid its quarterly dividend of $0.11 per share to shareholders of record at the close of business on April 9, 2020.
  • Stockholders' Equity at FY 2020 second-quarter end was $4.56 billion, compared to $5.07 billion at FYE 2019. FY 2020's second-quarter end book value per share was $36.34 per share, compared to $35.99 at FYE 2019.
  • The Company ended its FY 2020 second quarter with a debt-to-capital ratio of 48.6%, compared to 46.4% at FY 2020’s first-quarter end and 43.6% at FYE 2019.
  • The Company ended FY 2020’s second quarter with a net debt-to-capital ratio (1) of 43.2%, compared to 42.3% at FY 2020’s first-quarter end, and 32.9% at FYE 2019.
  • The Company ended FY 2020’s second quarter with approximately 62,100 lots owned and optioned, compared to 62,000 one quarter earlier, and 54,600 one year earlier. Approximately 37,100 of these lots were owned, of which approximately 17,200 lots, including those in backlog, were substantially improved.
  • In the second quarter of FY 2020, the Company spent approximately $159.9 million on land to purchase approximately 1,579 lots. The Company ended FY 2020’s second quarter with 326 selling communities, compared to 328 at FY 2020’s first-quarter end and 311 at FY 2019’s second-quarter end.

Financial Guidance:

  • As previously announced, due to the business disruption and the evolving and uncertain impact of the Covid-19 pandemic on the U.S. economy, the Company has withdrawn its full fiscal year 2020 guidance and will suspend providing such guidance for the foreseeable future.
  • Douglas C. Yearley, Jr., chairman and chief executive officer, stated: “While net signed contracts in the first four weeks of May were down 37% year-over-year, we are very encouraged by recent deposit activity. Our deposits, which typically precede a binding sales contract by about three weeks and represent a leading indicator of current market demand, were up 13% over the past three weeks versus the same three-week period last year. Importantly, our recent deposit-to-contract conversion ratio has remained consistent with pre-Covid-19 levels. Web traffic has also steadily improved from the lows we experienced in mid-March and has returned to the same strong activity we enjoyed pre-Covid-19 in February. These early trends suggest the housing market may be more resilient than anticipated just two months ago."

Source: Toll Brothers

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