Toll Brothers Inc. (NYSE:TOL) early Wednesday posted market-beating fiscal first quarter earnings results, as its backlog continued to grow but the average selling price of homes is steadily declining.

Written by StockNews.com

The Horsham, PA-based luxury homebuilder reported Q1 EPS of $0.42, which was $0.07 better than the Wall Street consensus estimate of $0.35.

Revenues fell 0.9% from last year to $920.7 million, also topping analysts’ $893.7 million view.

Toll Brothers noted that net signed contracts rose 14% to $1.24 billion, driven by a 22% gain in units to 1,522 in the latest period. The average price of net signed contracts was $816,700, however, down from $869,600 in the year-ago quarter.

TOL’s home backlog rose 19% to $4.35 billion in Q1, or 21% to 5,145 units in unit terms. The average price of homes in its backlog fell to $844,500 from $861,600 at the end of the year-ago period.

Looking ahead, Toll Brothers forecast full-year 2017 revenues ranging from $5.19 to $6.19 billion, which straddles Wall Street’s estimate of $5.68 billion.

It also lifted the low end of its 2017 delivery guidance, now expecting to deliver between 6,700 and 7,500 new home units this year. It had previously forecast a range of 6,500 to 7,500. TOL still expects average selling prices between $775,000 and $825,000. Clearly, a trend of lower selling prices is developing as the amount of homes it sells increases.

Q2 deliveries are seen ranging from 1,350 and 1,650 units, with an average selling price of $810,000 to $835,000.

The company commented via press release:

“As the only national home building company focused on the highly fragmented luxury market, we continue to enjoy strong demand and produce industry-leading contract growth. Our strategic plan to diversify geographically and by product type enables us to appeal to a wide demographic interested in a luxury home. This is helping to drive our results. We have a nationwide footprint of well-located and beautifully amenitized communities. Our homes offer great lifestyles, top school districts, and ease of access to employment and cultural centers, all for a great value. Our “affordable luxury” product lines reach a large and growing base of affluent move-up, empty-nester and millennial buyers. Our strong balance sheet gives us a financial edge over the small and mid-sized builders who are our primary competition in the luxury market.”

...Year-to-date, TOL has gained 3.19%, versus a 5.80% rise in the benchmark S&P 500 index during the same period.

TOL currently has a StockNews.com POWR Rating of A (Strong Buy), and is ranked #4 of 23 stocks in the Homebuilders category.