Toll Brothers Trims Outlook
For Home Deliveries in 2006
Toll Brothers Inc. lowered its estimate for homes delivered in 2006, pointing to a tougher regulatory environment, community-opening delays and softening demand in some markets.
Shares of Toll were down $4.66, or 12% to $34.75 in afternoon trading on the New York Stock Exchange.
"It appears we may be entering a period of more moderate home price increases, more typical of the past decade than the past two years," said Robert Toll, chief executive at the Horsham, Pa., home builder, in a statement.
Other housing-related stocks fell as well; shares of DR Horton Inc. were off 4%, Pulte Homes Inc. declined 6% and Centex Corp. gave up 3%, all on the Big Board. Home Depot Inc., a component of the Dow Jones Industrial Average, fell 1.9%.
Toll cut the amount of homes it expects to deliver in 2006 to between 9,500 and 10,200, from previous guidance of between 10,200 and 10,600 homes, due to fewer selling communities and because some it brought forward some deliveries to 2005.
The company also said that, since Hurricane Katrina, it has observed buyers taking longer to make their purchasing decision. "We attribute this change to the significant decline in consumer confidence in the last two months that was precipitated by the hurricanes and their aftermath, and to record gas prices," Mr. Toll said.
The company said the lowered home-delivery estimate for 2006 is partly due to an "increasingly complex regulatory process" that is delaying the opening of new communities.
Also Tuesday, the company said home-building revenue in the fiscal fourth quarter grew 39% to a record $2.01 billion. Fourth-quarter contracts grew by 4% to around $1.59 billion, or 2,272 homes, while its fourth-quarter-end backlog was approximately $6.01 billion, or 8,805 homes, up 36% compared to a year ago.
Joel Rassman, chief financial officer at Toll Brothers, said the 400 to 700 home reduction in the company's 2006 delivery estimate "should reduce our earnings growth projections for fiscal-year 2006." The company will provide more details when it is scheduled to release earnings on Dec. 8, he added. Analysts polled by Thomson First Call see per-share earnings of $5.60 in fiscal 2006, with estimates ranging from $5.15 to $6.
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