Stocks rose on Tuesday, with the S&P 500 (^GSPC 1.40%) moving briefly above its all-time high but ultimately fading in the afternoon. The Dow Jones Industrial Average (^DJI -0.24%) added a quarter percentage point.
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Shares of housing stocks jumped after a very strong earnings report from Toll Brothers (TOL 3.24%). The iShares US Home Construction ETF (ITB 2.87%) closed up 3.7%. Semiconductor stocks made gains, with the iShares PHLX Semiconductor ETF (SOXX 1.82%) rebounding 2% from recent weakness.
As for individual stocks, Toll Brothers surprised analysts with its second-quarter results and Kohl's Corporation (KSS 2.41%) reported a big profit gain on robust sales.
Toll Brothers builds some optimism for the housing market
Luxury homebuilder Toll Brothers reported higher revenue and profit in the second quarter thanks to higher unit sales and rising home prices in most of the country, and shares soared 13.8%. Revenue increased 27% to $1.91 billion, compared with the analyst consensus estimate of $1.81 billion. Earnings per share grew 45% to $1.26, well above expectations for $1.03 in EPS.
Total units delivered increased 18% to 2,246 and the average price of homes delivered was up 7.6% to $851,900. Adjusted gross margin was 24.3%, down 70 basis points from the period last year, but improved from 22.5% last quarter. The value of signed contracts grew 12% to $2.03 billion, with contracts per community up 18% to 8.1. The value of contracts grew by double digits in the West, South, and Mid-Atlantic regions, and were flat in the East.
The company bought back 3.7 million shares for $37.24 each in the quarter, and has reduced the share count by 9% since Q2 last year.
Toll Brothers is optimistic about the new home industry going forward. "We believe there is room for continued growth in the new home market in the coming years," said Executive Chairman Robert I. Toll in the press release. "Household formations have been increasing and in many regions the aging housing stock may not satisfy the lifestyles of today's buyers. Yet new home production has not kept pace with the growth in population and households."
Kohl's reports continuing sales gains
Department store chain Kohl's reported better-than-expected sales and earnings and raised guidance for the year, boosting the stock by 1.7%. Revenue increased 4% to $4.57 billion and earnings per share soared 42% to $1.76. Analysts had been expecting the company to earn $1.64 per share on revenue of $4.26 billion.
Comparable sales increased 3.1% in the second quarter, compared with a decline of 0.4% in Q2 last year. The comps gain was driven by an increase in average transaction value, with the strongest sales gains in men's, women's, and footwear departments. Digital sales increased at a mid-teens rate. Gross margin expanded from 39.1% to 39.5%, thanks to an improvement in inventory management.
Looking forward, Kohl's bumped up its guidance for full-year EPS to $5.15-$5.55 from a previous range of $5.05-$5.50, after having raised guidance last quarter.
"We are pleased to report that our sales momentum continued in the second quarter, resulting in a comparable sales increase of 3.1%, our fourth consecutive quarter of positive comparable sales," said CEO Michelle Gass in the press release. "We saw strength across the business -- both our store and digital channels, all regions of the country, and our proprietary and national brands."
The market's reaction to an excellent quarter may have been muted, but the stock is already up 48% for the year as the company continues to execute well.