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Earnings Results: Toll Brothers sells fewer homes, but builder ‘encouraged’ by lower mortgage rates

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Toll Brothers Inc. late Tuesday reported shrinking quarterly profit and revenue, but the builder said it was “encouraged” by lower mortgage rates and that it has broadened its appeal to buyers.

Toll Brothers
TOL,

earned $445.5 million, or $4.11 a share, in the fourth quarter, compared with $640.5 million, or $5.63 a share, in the year-ago quarter.

Total revenue fell to $3 billion, from $3.7 billion a year ago, which included an 18% drop in home sales revenue to $2.95 billion. It delivered 2,755 homes in the quarter, down 27% year-on-year.

Analysts polled by FactSet expected the company to report earnings of $3.72 a share on sales of $2.78 billion.

“As we approach the start of the spring selling season in January, we are encouraged by the recent 75-basis-point drop in mortgage rates,” Toll Brothers said in a statement. “With resale inventories at historic lows, buyers continue to be drawn to new homes, and we expect lower rates with lower inflation to add to this already solid demand.”

The company’s strategy “of broadening our home offerings to include lower price points, coupled with our focus on increasing our supply of spec homes and growing our community count, has positioned us well for this market,” it said.

Long-term demand outlook “remains bright,” the company said, thanks to demographics, a supply-demand imbalance from more than a decade of underproduction, and the aging of the country’s existing housing stock.

Toll Brothers shares rose 2% in the extended session Tuesday, after ending the regular trading day flat. In the year to date, the builder’s stock has gained about 75%, compared with a 19% advance for the S&P 500 index
SPX.

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