New Outlook, No Surprise
How things have changed. The luxury-home builder now expects to take a second-quarter charge of $90 million to $130 million to account for falling home values across the country.
“You could generalize that earnings visibility is low for Toll Bros. for the next few quarters and for the homebuilder group also,” says Standard & Poor’s Equity analyst Tom Smith. “The write-down [$90 million to $130 million] was ahead of my estimates. But you never know what that amount is until the accountant comes back with it.”
Smith lowered his price target on Toll Bros. to $33 from $36 after preliminary earnings were announced and maintained a “hold” rating on the stock. But it would be lying to say these results were unexpected. Toll Bros. shares were down barely 1% on Wednesday afternoon. “A lot of this bad news is built in [to the stock],” Smith says.
Coincidentally, the National Association of Realtors reported May 8 that home prices would decline nationwide in 2007. After stating in January that prices would edge up slightly over the year, the group now expects the national median home price to decline 1% in 2007 to $219,800, marking the first ever year-over-year decline in prices since they began tracking them in 1968.
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