Toll Brothers
(NYSE:TOL) reported devastating results for their fiscal second quarter
amid a housing market that continues to struggle. The home builder's
earnings fell from $174.9 million to $36.9 million while its revenues
sank 23% to $1.17 billion. Toll also suffers from a high cancellation
rate of 19%, a 40% decline in contracts, increasing unsold inventory
and a backlog that decreased by 32%. These numbers paint the picture of
a housing market that continues to struggle to gain foothold and
engineer a turnaround.
Toll Brothers also announced that it was
so uncertain about future revenues that it will not make an earnings
forecast for the rest of the year. CEO Robert Toll only said that, "We
continue to operate conservatively in the current difficult market. In
what generally remains a soft market, there are glimmers of strength in
certain territories."
Some analysts and investors were hoping
that last week's rise in the mortgage applications index would provide
a boost to the company's earnings. Most analysts polled pegged the
company's earnings this quarter at $0.25. However, the company's
earnings ended up at $0.22 as many now believe that the rise in
mortgage applications is simply the result of more strict regulations -
that is, more people were being rejected and reapplying.
These results are also bad news for other homebuilding and related stocks including
Home Depot (NYSE:HD) and
Lowe's
(NYSE:LOW). Analysts were expecting these companies to turn around in
the second quarter; however, the results posted by Toll Brothers
suggests that the market has a long way to go before any meaningful
recovery. Regardless, this is definitely a sector to watch as we wait
for the housing market to report a turnaround in demand.
Related CompaniesBrookfield Homes Corporation (BKS)D.R. Horton (DHI)Pulte Homes (PHM)