In the midst of global uncertainty, Toll Brothers released its third quarter earnings this morning, and, the results fell below what a number of analysts anticipated. 

“Operating earnings were modestly below our estimate while GAAP earnings continued to include impairments,” wrote Keefe, Bruyette, & Woods’ Jade J. Rahmani. 

Toll did see order growth of 12% in units and 30% in value during the quarter and another 16% (in unit growth) in August. Toll said California was performing well and noted strength in New York City, Seattle, Dallas, and Nevada, according to Rahmani.

“Absorption pace (orders per community) increased 5% year-over-year, suggesting continued moderate underlying growth,” Rahmani wrote. “The cancellation rate remained low at 5.9% from 3.1% last quarter and 6.6% a year ago, reflecting Toll's high-quality luxury buyer.”

Toll’s gross margin was 19.8% for the quarter but excluding interest, impairments, and changes in reserves, its margin rose to 25.6%.

Toll ended its third quarter with 267 selling communities, compared with 269 at 2015's second-quarter end, and 256 at 2014's third-quarter end. The builder expects to end fiscal year 2015 with 270 to 285 selling communities.

“Although community count was below our 11% expectation, this reflects the impact of broader delays as opposed to company specific issues,” said UBS’ Susan Maklari in an analyst note.

While Maklari is lowering her 2015 EPS estimates for Toll, she is optimistic about 2016 and beyond because of the builder’s increased deliveries from higher margin geographies and product.

“As we approach the next stage of the recovery, we expect Toll will outperform,” Maklari wrote. “More specifically, we look for the company to benefit from its increased California exposure, as this market carries higher levels of profitability; expanding deliveries in New York from its City Living business; and further market share gains in its higher-end traditional single-family business as it leverages its strong balance sheet to invest in well-located, unique land positions.”