Shares in Toll Brothers pare back gains after new home sales data

Shares in Toll Brothers pared back their gains in afternoon trade on Tuesday after gloomy data on new home sales took the shine off of the luxury homebuilder’s earnings beat.

Toll Brothers shares had initially climbed as much as 3 per cent after reporting a 40 per cent year-on-year increase in fiscal second quarter profits. But by afternoon trade, the shares were hanging onto a slender 0.9 per cent gain after new figures released at 10am showed new home sales in April had tumbled by the most in two years.

According to the US Census Bureau, sales during the crucial selling month fell 1.8 per cent to an annualised pace of 610,000 units, just one month after the sales pace was at its highest since October 2007.

Joshua Shapiro , chief US economist at MFR, cautioned against reading too much into the new home sales data – which tends to be volatile – and noted that the underlying trend remains solid.

Indeed, this was underscored by Toll Brother’s latest earnings, which include the month of April.

Revenue in the three months to end of April rose 22 per cent to $1.36bn from the period in the previous year, ahead of expectations of $1.25bn. Net income of $124.6m, or 73 per share, beat estimates of 62 cents per share.

“This was the best spring selling season we have had in over 10 years,” said Douglas C Yearley Jr, chief executive.

“The supply of new and existing homes continues to trail the growth in population and households,” he continued. “We are producing strong results even with industry-wide home production levels still well below historic norms . . . Based on our land supply and other competitive advantages, we believe we are well positioned for the coming years.”

Based the quarter’s backlog and the pace of activity, the company now expects to deliver between 6,950 and 7,450 homes in 2017, compared to previous guidance of 6,700 to 7,500 units.