The last time we heard from Toll Brothers in late February, the Horsham, Pa.-based builder was definitely seeing indications of a strong spring selling season. Sales were up through its Jan. 31 first quarter end, and February sales were tidily exceeding expectations.
On Wednesday, well know how the luxury home builder fared during the rest of the spring selling season when it reports its second quarter results through April 30 before market opening.
None of the analysts are expecting the builder to turn a profit. The average consensus for earnings is a loss of $0.23 per share, with the high loss estimate at $0.63 and the low at $0.07.
The problem, analysts said, is likely to have more to do with margins than sales. Ticonderoga analyst Stephen East expects gross margin to be down 437 basis points year over year, but up slightly by 25 basis points over its first quarter.
The margin gets hit by excessive interest expense and a declining selling price, East wrote in an opinion this week.
On the bright side, sales are expected to be up. The companys first quarter sales dollar numbers were up 129% over the prior year while volume had climbed by 98%. Cancellations, too, were down significantly to 6.7% from 37.1% in the same quarter of 2009. And those numbers were higher despite a community count drop of 26%.
That trend is expected to have continued as the spring selling season unfolded. East said the move-up market appears to be staging a bit of a comeback. And prices are expected to have risen as well.
To capture that market, Toll has been working to raise its sagging community count, steadily buying distressed communities across the country.
Wednesdays call with analysts will be the first since industry icon Bob Toll announced that he will be turning over the CEO title to Douglas C. Yearley Jr., a 20-year Toll veteran who is also a lawyer. Toll will remain executive chairman of the board for the company.
Of interest will be whether Toll or Yearley takes the lead during the investor conference call. Officially, Yearley doesnt take the reins until June. And Toll has always seemed to enjoy his position as industry prognosticator, so the odds are he wont be able to resist at least one more prediction for analysts.