Toll Brothers share price up, posts strong Q4 and FY performance due to higher prices and increased demand

Toll Brothers Inc, the largest U.S. luxury home builder reported a jump in profit, boosted by higher prices and strong performance by its West Coast division.

The company reported a 29% increase in revenue for the fourth and final quarter of this business year to $1.35 billion versus 2013s Q4 revenue of $1.04 billion. The results were boosted by a higher average price of homes built of $747 000, a $15 000 increase compared to Q2 and a $44 000 increase against the same period last year. Sales in units rose 22% to 1 807.

In Q4 Toll Brothers announced a 16% rise in net signed contracts to $970.2 million, or 10% in units to 1 282, as the company benefited from the slowly expanding housing market.

The U.S. has been suffering over the first eight months of this year as elevated home prices and rising interest rates suppressed demand. However, according to the Commerce Department, in September new home starts increased 6.3% to an 1.02-million-unit annual pace, up from a 14.4% drop in August.

“For the first time in four quarters, our contracts were up in both dollars and units compared to the prior years same period” CEO Douglas Yearley said.

The company benefited from strong results from its West Coast division, including Arizona, California, Colorado, Nevada, and Washington, which reported a 25% increase in revenue for the quarter. Another star player for the company was the Mid-Atlantic region with a 17% revenue gain.

Toll Brothers also reported that in the three months ended October 31, the company repurchased 2.94 million shares of its common stock at an average price of $30.78 for a total amount of $90.4 million.

In its backlog unit the company reported a full-year 3% increase in revenue to $2.72 billion from $2.63 billion a year earlier. Home building sales increased 49% to $2.67 billion and net contracts signed edged up 7% to $3.90 billion.

“We are pleased with our strong finish to FY 2014 and, given the fourth quarters improvement in demand, begin FY 2015 with optimism” said Mr. Yearley.

Toll Brothers Inc gained 0.81% on Friday and closed at $32.22 in New York. On Monday the stock edged up 2.79% in the early session to trade at $33.12 at 14:51 GMT, marking a one-year increase of 3.69%. According to the Financial Times, the 19 analysts offering 12-month price targets for Toll Brothers Inc have a median target of $38.00, with a high estimate of $47.00 and a low estimate of $26.00. The median estimate represents a 17.94% increase from the last close price of $32.22.