Wednesday, August 8, 2007

Toll Brothers Revenue Declines

From the WSJ:

Luxury-home builder Toll Brothers Inc.'s home-building revenue fell 21% in its fiscal third quarter, as contract signings continue to drop.

For the quarter ended June 30, the Horsham, Pa., firm said home-building revenue decreased to about $1.21 billion from $1.53 billion a year earlier, as net signed contracts declined 31% to $727.1 million from $1.05 billion during the year-earlier quarter.

Toll Brothers said the fiscal third-quarter cancellation rate was 24%, compared with 19% in the fiscal second quarter. Third-quarter cancellations were 347, the lowest in a year. Backlog for the quarter fell to about $3.67 billion, down 34% from $5.59 billion in the year-ago period. And Toll Brothers signed 1,457 gross contracts in the quarter, a 17% decrease from 1,760 gross contracts signed a year ago.

"We believe significant pent-up demand is building, based on solid demographics, a decent economy and still-strong employment," Chairman and Chief Executive Robert I. Toll said in a written statement. "However, we caution that, with the uncertainties roiling the mortgage markets right now, the pace of home sales could slow further until the credit market settles down."

Personally, I think the CEO is throwing shareholders a bone of hope that doesn't exist right now. Overall, inventories of new and existing homes are near all-time highs, mortgage lenders are tightening lending standards and credit to mortgage lenders from investment banks is drying up. These are not the ingredients of a housing rebound.