Toll Brothers Inc. upended Wall Street's expectations Wednesday, reporting a profit for its fiscal first quarter and higher contracts for new homes.
But what everyone wanted to know is how sales are shaping up so far this spring, traditionally the busiest time for homebuilders.
CEO Douglas Yearley Jr., delivered more positive news along with the quarterly results: The company's national spring sales event, which ends this weekend and offers buyers upgrades on home features such as cabinets and kitchen fixtures, has already brought in 15 percent more deposits than last year.
That's noteworthy, considering the industry got a big boost last spring from federal tax credits offered to entice reluctant buyers.
But Yearley struck a cautious tone, saying it's too early to render a verdict on the spring season.
Last year, after the government tax credits expired in April, new home sales collapsed on the way to the lowest level for any year since at least 1963.
"The goal of last year's tax credit was obviously to kick the market and then keep it moving, and it certainly kicked the market, but it was unable to keep it moving," Yearley said in an interview. "This year, I'm hopeful that, while the numbers are very similar to last year — up slightly — this will be more sustained, more natural demand."
While stressing that the housing market remains tough, and that it's too early to know how the spring home-selling season will turn out, Yearley noted that he's seeing improvement in some markets in Texas and the Northeast.
In the November to January period, Toll's contracts on new homes climbed 4 percent in units and 5 percent in value to $307.2 million.
On a per community basis, contracts rose 7 percent to 2.81 units, which was a strong improvement from the same periods in 2008 and 2009. Still, the builder said the results were well below a first-quarter average of 5.06 net signed contracts per community from 2001 through 2010.
In recent weeks, several large builders have reported their home deliveries and contracts for new homes fell sharply in and around the final months of last year.
Whether 2011 marks a turnaround for housing will hinge largely on how home sales fare this spring.
Sales of previously occupied homes rose slightly in January to a seasonally adjusted annual rate of 5.36 million, the National Association of Realtors said Wednesday. That's up 2.7 percent from 5.22 million in December.
Economists expect January new home sales data, due out Thursday, will be down to a seasonally adjusted rate of 303,000 homes versus 329,000 in December. That's about half the 600,000 a year pace that economists view as healthy.
Many would-be homebuyers continue to be put off by high unemployment, uncertainty over home prices and weak consumer confidence in the economy.
"The homebuyer is still wary," Yearley said.
The builder estimates it will deliver between 2,200 and 2,800 homes this year, down from its prior estimate of 2,100 to 2,900. Last year, it delivered 2,650 homes. The builder also projects it will open about 50 communities his year.
Yearley expects the company will add more employees this year than in 2010, but the ramp-up in hiring remains, as everything else, cautious.
"We're only filling positions that are needed for today's activity, but we're certainly back to growing," he said.
Homebuilders are a bellwether for the housing market and the economy. Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, by some estimates.
Toll Brothers, which is based in Horsham, Pa., has operations in 19 states.
The builder reported net income of $3.4 million, or 2 cents per share, for the quarter ended Jan. 31. That compares with a loss of $40.8 million, or 25 cents per share, a year earlier.
Analysts surveyed by FactSet forecast a loss of 8 cents per share.
The quarter included a $20.4 million tax benefit compared with a $16 million tax benefit a year ago.
Revenue climbed 2 percent to $334.1 million from $326.7 million, besting Wall Street's $317.7 million.
Shares ended the regular session up 44 cents, or 2.1 percent, to $21.20.
- Toll Brothers Inc.