Toll Brothers (TOL) is one name I always watch in the group since they cater to the top end. Let's see what they are saying (it seems to differ from Cramer's "Fed Cut Solves Everything" and "We could have a home shortage by fall scenario") Not to pick on Cramer, but some of this stuff I hear is simply outrageous :)
- Toll Brothers Inc. doesn't see any end in sight to the U.S. housing market's woes as the luxury home builder said Wednesday that first quarter home-construction revenue fell 22% compared to the same period last year.
- "The housing market remains very weak in most areas. Based on current traffic and deposits, we are not yet seeing much light at the end of the tunnel," said Robert Toll, chairman and CEO.
- Toll also said its backlog fell to $2.4 billion, down 42% from the first quarter of fiscal 2007, as the number of signed contracts on homes fell 46% from last year. In addition, the average price of a house sold by Toll fell, while the average price of canceled houses rose. (that last piece is interesting - I think it shows people are saying "Why should I buy this asset now when a year from now it will be far cheaper.")
- The company's outlook comes a day after analyst Daniel Oppenheim at Banc of America Securities upgraded the company's shares to neutral from sell, saying he had a more positive stance on home-building stocks due to improving affordability, reduced construction and less risk as adjustable-rate mortgages reset because of lower interest rates.
- Tomlinson at Majestic Research said it's too early to tell yet if the recent rally in home-construction stocks means the worst is behind the battered industry. "It depends on the spring selling season, but sentiment is still pretty bad out there," the analyst said.
- However, he said federal plans to temporarily raise the limit on conforming loans would particularly help luxury-sector builders such as Toll. The higher selling price means buyers of Toll homes would be more likely to use so-called jumbo loans, which are more expensive and don't conform to standards set by Fannie Mae and Freddie Mac. Still, Tomlinson said if raising the loan limit does have an impact, it will take a while to show up in Toll's orders.
- Analysts at Deutsche Bank in a research note Wednesday wrote the view for Toll's order trends remains bleak. "We admire management's conviction in its pricing discipline, but given our view that home price declines are likely to worsen, we still think Toll Brothers is just delaying the inevitable in pricing and impairments," they said.
- "We suspect customers may be trading down to lower price attached product for affordability and/or mortgage qualification reasons," Bear Stearns analysts wrote. "Also, the higher average price of cancellations indicates that buyers of Toll's single-family homes could be experiencing significant buyer's remorse as they watch home prices fall and grow fearful these trends are likely to continue." (Bingo)
- "We continue to think Toll needs to lower prices more aggressively near-term to regain volume and work through its long land supply," added Banc of America Securities.
No position
