When all was said and done, what would have been a sloppy quarter for luxury builder Toll Brothers (NYSE: TOL) a year or two ago was at least passable under current conditions.
Oh, sure, Toll's quarter ended in July included a loss of $29.3 million, compared with a profit of $26.5 million in the same quarter a year ago. But focusing on the most recent quarter, without its nearly $85 million in after-tax writedowns, the company would have earned about $55 million. Those results were solid enough to boost Toll's share price by $0.27 -- 1.09% -- on Thursday, a day when the Dow retreated by nearly 350 points.
And if it appears that the market is simply hoping that the builders have turned as a group, you need to know that Hovnanian's (NYSE: HOV) shares fell more than 11% on Thursday, after the company reported a more than $200 million loss. It was also a day of sizable drops for other big builders such as Lennar (NYSE: LEN) and Ryland (NYSE: RYL).
But back to Toll, whose revenue was down by 34% in the quarter, while its net contracts were down by 27%. More importantly, buyer cancellations backed off somewhat, which might indicate that the company is beginning to gain traction against the effects of the housing bust.
For the current quarter, CEO Bob Toll and his minions expect that buyer incentives will cut into revenue, leading to a lower figure than that of the quarter ended in July. Nevertheless, calling upon a phrase he used in other recent quarters, Toll said he believes there's "pent-up demand" for new homes. But he adds that that demand will continue to be affected by the high number of foreclosed homes on the market.
So all in all, it was an OK quarter for Toll. I continue to believe that the company's luxury builder status will propel it to the head of the class whenever a real housing recovery manifests itself. I'd also look for it to be followed by KB Home (NYSE: KBH), which avoids speculative building, and perhaps by Centex (NYSE: CTX), which has been especially brutal in writing down the values of its land and other assets carried on its balance sheet.
Toll has been accorded but one star by Motley Fool CAPS players. Would you add another?
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