Toll Bros. Profit Down 44 Percent

PHILADELPHIA -- Luxury home builder Toll Brothers Inc.'s fourth-quarter earnings fell 44 percent, but the company said it sees some signs of stabilization in the slumping housing sector and raised its forecast for first-quarter home deliveries.

"Fifteen months into the current slowdown, we may be seeing a floor in some markets," Robert Toll, the company's chief executive officer, said Tuesday in a statement.

Shares of Toll Brothers rose 3.7 percent, or $1.17, to $33.08 in midday trading on the New York Stock Exchange.

In the fiscal fourth quarter, Toll Brothers posted net income of $173.8 million, or $1.07 per share, compared with $310.3 million, or $1.84 per share, during the same period last year.

Analysts polled by Thomson Financial were looking for fourth-quarter earnings of $1.06 per share.

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Quarterly revenue dropped 10 percent to $1.81 billion from $2.02 billion, narrowly missing Wall Street's estimate of $1.82 billion.

A higher-than-expected number of buyers canceled their orders in the latest quarter and the company walked away from optioned land amid the housing slowdown.

The most recent quarter includes writedowns of $68.7 million, or 42 cents per share, versus writedowns of $1.4 million, or less than a penny per share, last year. Excluding the writedowns, which were mostly for owned and optioned land, fourth-quarter earnings were $1.49 per share in 2006.

Robert Toll said a few areas in the East Coast showed signs of stabilization, including Washington, D.C., and suburbs in Maryland and northern Virginia. After cutting projections for several quarters, the Horsham, Pa.-based builder raised the number of homes it expects to deliver in the first quarter to a range of 1,600 to 1,900 homes at average prices of $670,000 to $680,000. That's up from a prior projection of 1,500 to 1,800 units.

But Greg Gieber, an analyst with A.G. Edwards, said the housing market may not have hit bottom yet.

"It's too soon to tell," he said. "In November, there is a seasonal uptick in home sales."

For the fourth quarter, the value of signed contracts fell by 56 percent to $706 million from a year ago. The worst showing was in Florida and the Carolinas, where the number of contracts fell by 78 percent.

The southwestern states of Arizona, Colorado, Nevada and Texas were the second weakest, down 62 percent in the number of contracts signed. Toll's Midwest market _ Illinois, Michigan, Minnesota and Ohio _ had the smallest dip, down 38 percent in contracts. Signings plunged by roughly half in the Northeast, Midatlantic and the West.

For fiscal 2007, the builder sees deliveries of 6,300 to 7,300 homes at an average price of $660,000 to $670,000 and total home-building revenues between $4.34 billion and $5.1 billion.

It anticipates full-year 2007 earnings in a range of $260 million to $340 million, or $1.58 to $2.08 per share. The projection includes a proposed accounting change that Toll Brothers expects will be implemented, which shifts earnings of 22 cents to 29 cents per share to later years.

Toll Brothers currently books the percentage of homes completed as revenue, with restrictions. The proposal would make the company recognize the revenue once the house is completely built.

Analysts expect earnings of $2.30 per share in 2007, excluding the proposed accounting change.

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