CHICAGO -- Toll Brothers Inc. Tuesday said it expected to report a weaker-than-expected 10 percent drop in quarterly home-building revenue, and warned of a slowdown in some formerly hot regions, as the U.S. housing market continues to weaken.
The luxury home builder also said it expects to take fourth-quarter write-downs of $50 million to $100 million on both the land it owns and has options to buy. That's well above the $4 million in quarterly land-related charges it previously forecast, an amount that will reduce net earnings by 18 cents to 36 cents per share.
The news sent the company's shares down nearly 2 percent in before the bell.
After years of strong growth, the U.S. housing market has slowed in recent months, with new home sales and prices both down double-digits from year-ago levels, hurt by rising interest rates, steep energy prices and a deterioration in consumer confidence.
The turnaround has stranded consumers who wanted to trade up in their unsold homes and kept others nervously waiting on the sidelines for the slump to end. As a result, home builders have been lining up to report lower profits and pull back on financial forecasts.
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BUYER CONFIDENCE WANES
"We believe weak buyer confidence is keeping many customers on the sidelines," Chief Executive Robert Toll said in a statement. "We continue to look for signs that a recovery is imminent but can't yet say that one is in sight."
Preliminary numbers show home-building revenue of $1.81 billion for the fourth quarter ended on Oct. 31. Analysts, on average, were expecting $1.87 billion, according to Reuters Estimates.
The company's fourth-quarter contracts were down 55 percent to $709.6 million compared to the year-ago period. Toll Brothers said its quarterly total contracts suffered from a higher-than-normal 585 cancellations, one-fourth of which came in the Orlando and Northern California markets.
Toll Brothers lowered its land position by around 6,500 lots, ending the quarter with around 74,000 lots owned or controlled, a decline of 19 percent.
Toll Brothers said it expected to deliver between 6,300 and 7,300 homes for fiscal year 2007, compared with its previous forecast of 7,000 to 8,000. The company expects to deliver between 1,500 and 1,800 homes in the current first quarter.
The Horsham, Pennsylvania company is scheduled to release its fourth-quarter financial results on Dec. 5 and did not update its previous forecast of earnings of $1.33 to $1.53 per share.
In premarket electronic trading, shares in the luxury home builder slid 79 cents to $27.52 from a close of $28.05 on the New York Stock Exchange on Monday.
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