"People just keep buying anyway .... I've never seen anything like this in almost 40 years in the business."
That quote from Robert Toll, the CEO of Toll Brothers
It's obvious that the real estate market continues to be a favorite topic of discussion for many people as they watch their homes continue to jump in value on what seems to be a daily basis. From the respected minds of Alan Greenspan and the Fool's Seth Jayson (man, you owe me one for that, Seth), to the plethora of real estate clubs popping up everywhere, everybody seems to have an opinion on the state of the market. Meanwhile, as people debate whether it's froth, a bubble, or a new supply-and-demand cycle, prices continue to climb.
Regardless of your opinion on the sanity of the market, however, there's no questioning the benefits for luxury home builder Toll Brothers. The company recently reported fiscal second-quarter results, and its numbers continue to astound. It generated net income of $170.1 million, or $2.01 per share, up 135% from last year's $72.4 million, or $0.89 per share. That easily topped the average estimates of $1.79 per share. Revenue was also up significantly, jumping 52% to $1.25 billion.
The future continues to look bright for Toll Brothers, with no evidence of a slowdown in sight. The company's second-quarter contracts and backlog of $5.87 billion were the highest for any quarter in its history. Through its first two quarters, Toll Brothers has signed accounts on 5,354 homes. At that pace, it should easily top its previous forecast of 8,050 to 8,400 homes for the year.
The company also managed to increase by 10,000 the number of home sites it controls to 68,000. Many of its sites are in hard-to-get, desirable locations, which allows it to keep pushing up its prices for high-end buyers.
Not surprisingly, with all of the extremely positive news, Toll Brothers increased its full-year guidance, now predicting a 70% increase in net income over last year. Even with the increase, the company still expects to generate a 20% jump in fiscal 2006 over those 2005 results.
Toll Brothers' stock price has outpaced even the housing market, more than doubling in the past year. For those who believe times have changed and the recent trends will continue, Toll Brothers is certainly a worthy investment. I, however, can't justify buying right now, despite the obvious strength of the company.
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Fool contributor Mike Cianciolo welcomes feedback and doesn't own shares of Toll Brothers.