Wednesday, April 16, 2014
Inquirer Daily News

Toll Bros. sales, shares rise, 'big deals' on the way

But higher lumber, concrete costs will trim builder margins

Toll Bros. sales, shares rise, 'big deals' on the way

Shares of Horsham-based homebuilder Toll Bros. Inc. topped $28 for the first time since 2007 yesterday after this stronger-than-expected quarterly sales and profit report.

Toll is exploiting a "resurgence of demand from move-up and luxury homebuyers," and "gaining significant market share" from private builders who have a tough time borrowing money from banks these days, wrote Raymond James analyst Buck Horne in a report to clients. RayJay boosted Toll Bros.' target price to $32, from $28, on expectations of higher profits.

"Downsizing baby boomers" who don't need big loans are filling Toll "City Living" developments in Brooklyn, Seattle, Center City Philadelphia and other markets, Horne added. So far in 2012, "orders climbed 47%" from last year, almost double what was expected, "allowing Toll to raise prices and reduce incentives in its most desirable communities. Demand has remained steady into May," with deposits (non-binding) up around 40% vs last year.  

Gross profit margins of 23% were juiced by higher profits on urban properties. But higher lumber and concrete prices mean "Toll’s construction costs are up ~$1,400 - $1,600 per house," which could eat into profits.

Toll bought $124 million worth of new land and the company said some "pretty big deals" are in the works. Possibly the focus will still be toward city projects, not the neglected suburbs of yesterday's sprawling Toll developments. "Toll only plans to bring one more of its ~90 mothballed projects on-line this year."

Joseph N. DiStefano
About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
Business Videos:
Also on Philly.com:
Stay Connected