Toll Brothers falls as home-builder's earnings miss estimates

, Bloomberg

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Toll Brothers Inc., the largest U.S. luxury-home builder, fell the most in eight months after reporting fiscal first-quarter earnings and revenue that trailed analyst estimates.

Net income for the quarter ended Jan. 31 was $4.4 million, or 3 cents a share, compared with a loss of $2.8 million, or 2 cents, a year earlier, the Horsham, Pennsylvania-based company said Wednesday in a statement. The average of 16 analyst estimates was for earnings of 10 cents a share, according to data compiled by Bloomberg.

Toll's biggest market is from Boston to Washington, where new-home sales have lagged behind growth nationwide amid rising foreclosures in the area and threats of federal budget cuts. The company delivered 746 homes in the quarter, about 100 fewer than analysts projected, said Robert Wetenhall, an analyst at RBC Capital Markets LLC in New York.

"The Street thought they would deliver 850," Wetenhall said in a telephone interview. "Expectations for Toll's operating performance appear to be ahead of fundamentals."

Toll fell 4.2 percent to $35.36 early Wednesday. It earlier declined as much as 5.1 percent, the biggest intraday drop since June 4. The Standard & Poor's Supercomposite Homebuilding Index lost 3.2 percent.

Builders in the Northeast had the lowest confidence level of any U.S. region this month, according to a National Association of Home Builders/Wells Fargo index released Tuesday. The national gauge unexpectedly dropped from a six- year high.

Higher Revenue

Toll's first-quarter revenue rose 32 percent to $424.6 million, compared with the average analyst estimate of $503.6 million. Deliveries increased from 564 a year earlier. Net signed contracts climbed 49 percent to 973 homes with a value of $614.4 million.

The average price of homes delivered fell to $569,000 from $571,000 a year earlier. Average prices were down because year- earlier sales included more New York City condominiums, which cost more and have higher profit margins.

Gross margin of 18.7 percent missed analyst estimates, Adam Rudiger, an analyst with Wells Fargo & Co. in San Francisco, wrote in a note to clients. Selling and administrative costs relative to sales were higher than his estimate.

Slower Turnover

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