By Helen Chernikoff
NEW YORK (Reuters) - U.S. luxury homebuilder Toll Brothers Inc
While tax gains and lower writedowns on land values helped its profit, revenue of $454.2 million beat expectations by 15 percent. Orders fell 16 percent, but analysts had forecast declines of up to 30 percent.
The company also did a good job of holding down administrative costs, said Morningstar analyst Mike Gaiden.
Toll reported net income of $27.3 million, or 16 cents per share, for the fiscal third quarter ended July 31, compared with a loss of $472.3 million, or $2.93 per share, a year earlier.
Analysts were expecting a loss of 14 cents a share, according to Thomson Reuters I/B/E/S.
The company sounded cautious, despite the results.
"Recent economic and political news continues to dampen our customers' confidence," said Executive Chairman Robert Toll.
On Wednesday the Commerce Department reported that in July, sales of new homes fell 12.4 percent from June to their slowest pace on record. Prices hit their lowest level in more than 6-1/2 years.
"Demand remains pretty abysmal," Gaiden said.
The National Association of Realtors on Tuesday reported that sales of used homes fell 27.2 percent in July from June to their slowest pace in 15 years. (For a graphic click: http://link.reuters.com/nut27n)
Toll transcended the weaker housing market primarily because it took $12.5 million in writedowns on land that lost value, far less than analysts had anticipated and down from $115 million a year earlier, Gaiden said.
"When things normalize, this company is in a very good position to deliver sound profitability," he added.
Impairments fell because Toll was smart enough to identify and mark down its weakest assets early, Gaiden said.
Toll Brothers is known among homebuilders for its eagerness to buy land, unlike other builders who minimize that risk by purchasing options to buy the land instead. The housing bust has only whetted the company's appetite for lots.
In July, the company said it was starting an investment fund, called Gibraltar Capital, to buy real estate assets such as loan portfolios and land for development.
"We are opportunistically looking to take advantage of the unfortunate disarray that exists in the market," said Executive Chairman Bob Toll during a conference call with analysts.
The company also said it is seeing an "excellent" flow of possible land deals, and its urban apartment tower segment, 12 percent of its business, has been "spectacular" in recent months.
Toll shares, which have fallen about 32 percent in the last four months, touched a 52-week low of $15.57 on Tuesday but were up 5.7 percent at $17.11 in afternoon trading on Wednesday.
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(Reporting by Helen Chernikoff; additional reporting by Archana Shankar in Bangalore; editing by John Wallace, Robert MacMillan and Leslie Gevirtz)
