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The economic slump in the US housing sector that started in the second half of 2007 has resulted in lower demand for new houses, rise in delinquencies and increasing cancellations. Toll Brothers and DR Horton were among the notable players in this sector to have suffered losses due to downturn in the housing sector.
On November 11, Toll Brothers, based in Horsham, Pennsylvania, reported a 41% drop in home-building revenues for the fourth quarter at $691 million, compared to $1.17 billion reported in the corresponding quarter last year. The revenue for the fourth quarter, however, was slightly better than analysts' mean expectation of $681.36 million.
The company said net contracts for the fourth quarter ended October 31, 2008 were for 539 units, down 18% from 656 units in the prior year period. Net signed contracts for the quarter declined 27% to $266.7 million from $365.3 million in the same period last year. The average price of net signed contracts in the quarter was about $495 thousands compared to $579 thousands in the third quarter of 2008 due to the higher average price of canceled units in fourth quarter of 2008 than in third quarter of 2008. The average price of canceled units in fourth quarter was about $785 thousands compared to $606 thousands in the third quarter of 2008.
For the full year, the total home-building revenues were $3.15 billion, 32% down from $4.65 billion reported for last year.
Considering the bleak economic scenario, the company did not provide any outlook or guidance for earnings in the fourth quarter of fiscal 2008. Analysts expect the company to report a net loss of $0.47 per share for the fourth quarter and net loss of $1.85 per share for the full year.
In the preceding third quarter of fiscal 2008, the company's net loss was $29.3 million, or $0.18 per share, compared to a profit of $26.49 million, or $0.16 per share, in the same quarter last year.
Excluding write-downs, the company posted a net income of $55 million, or $0.35 per share, down 52% from $115 million, or $0.70 per share, in the year-ago quarter. Analysts expected a loss of $0.36 per share for the quarter. Quarterly total revenues declined 34% to $797.67 million from $1.21 billion last year, but came above analysts' consensus revenue estimate of $771.70 million.
Among its peers, Homebuilder DR Horton, Inc. (DHI | Quote | Chart | News | PowerRating) reported a significantly wider net loss for the fourth quarter, hurt by higher one-time charges and plunging home sales, amid the ongoing housing slump.
Fourth-quarter net loss was $799.9 million or $2.53 per share, wider than a loss of $50.1 million or $0.16 per share recorded in the previous year, and wider than loss of $399.3 million or $1.26 per share in the preceding quarter. Quarterly revenues plunged to $1.75 billion from prior year's $3.12 billion, yet managed to surpass analysts' consensus estimate of $1.72 billion.
Ahead of the earnings release, the stock price of Toll Brothers rose 5.43% or $0.99 in the regular trading session on Wednesday and closed at $19.23, on volume of 7.2 million shares, which is higher than the 3-month average trading volume of 5.97 million shares. The stock had been trading in a broad range of $13.55 to $28.00 during the past 52 weeks.
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