Although Toll Brothers turned its first profit in nearly three years for its third quarter just past, it will be a challenge to repeat the feat for the fourth quarter, which ends Oct. 31, guidance offered by company executives during the company's Tuesday conference call suggests.

Fortified by fewer write downs, improved sales, general, administrative performance, and a NOL tax benefit of $25.5 million, the company reported income of $27.3 million, $0.16 a share, for its third quarter ended July 31.That compares with a net loss of $472.3 million, $2.93 a share, in the same period last year.

But some of those advantages are less likely to figure into fourth quarter accounting. What's more, Toll expects to sell fewer homes. Company guidance offered Tuesday forecast deliveries of between 560 and 760 homes in the current quarter, well under the 803 it delivered in the third quarter, CFO Joel Rassman said during the call. Total deliveries for the year would come in between 2,500 and 2,700 homes for Toll Brothers. The average sale price in the fourth quarter is expected to be between $560,000 and $570,000.

So while the outlook is somewhat sober, the tone of the call was predominantly positive. A "bright spot" was the performance of the company's City Living brand, high-rise urban developments pursued through joint ventures with other entities. In the third quarter the high-rises produced $38.5 million in contracts compared to $17.7 million last year.

"We continue to reduce incentives," said Douglas Yearley, who succeeded co-founder Bob Toll as CEO in June. "We continue to have strong sales in Hoboken, Manhattan and Brooklyn."

At the company's Manhattan property 303 E. 33rd, the company has sold 75 units in the last 12 months' time, 23 in the third quarter. The average price is $1 million, Yearley said. "What's happened in the last couple of months for us has been all positive."

So positive that the company is looking to develop similar projects in Boston and Washington D.C. Still, Yearley said he doesn't expect that portion of the business to accrue to more than 15% of its total in the future.

The company has also focused on strengthening land holdings in its more traditional single-family home market. "We are actively pursuing growth," Yearley said.

For the second quarter in a row, the company was able to increase its count of lots owned and optioned to 35,800 from a trough of 31,700 two quarters ago. The company spent $104 million on land acquisition in the third quarter and $340 million in the past nine months.

Summer has been a good time for land deals, Yearley said. "The sellers are more motivated this summer than they were this spring and winter. We are seeing excellent deal flow right now.

While the bigger deals bring competition from other large public builders and "Wall Street money," the smaller ones are ripe for Toll's picking.

"We are luxury," Yearley said. "Our competition pretty much is gone and it helps us tremendously when we are buying."

In response to an analyst's question about whether the slower summer sales pattern this year has caused Toll to taper off its land buying efforts, "We don't run our business on week-to-week sales results," Yearley said. "We are setting up on a land basis for better times. We are seeing a lot of distress deals and we are continuing to buy."

Company executives offered little new information on Toll's new subsidiary, Gibraltar, which recently partnered with other players, to buy a share of $1.7 billion in distressed real estate loans and properties from the FDIC. It did say that it hasn't funded the subsidiary with a substantial amount of cash or pigeon-holed it into a rigid business plan.

"The business plan is wide open," Yearley said. "It is an opportunity to take advantage of distress in the real estate industry."

Longstanding questions came up about what the company plans to do with its substantial cash holdings of $1.64 billion. One response: paying off $331 million on a term loan over the next couple of quarters. In the third quarter, it bought back $35.5 million in loans. It hasn't decided whether to buy back stock.

"We continue to evaluate that," said Yearley.

He also gingerly fielded a question about consolidation within the industry and whether Toll is likely to be part of that.

"We have always maintained that there would be consolidation in our industry," Yearley answered. "If you had a crystal ball and if you look out five years it certainly would seem that there would be consolidation with the large players."

He sees that as less likely with smaller builders when it would be easier to wait for them to close shop and then pick up their assets.

"Are we a player?" Yearley asked. "We acquired six small builders in years past. On the larger side, we have had many conversations with many builders... We are not actively looking for consolidation at this time, but, again, the industry is fragmented so you think it could happen."