TOL Toll Brothers Inc

Toll Brothers Inc. on Tuesday reported better-than-expected profit and revenue in the second quarter, helped by higher pricing and contracts, and signaled that market conditions could continue to boost the luxury home builder's performance.

"We continue to believe the drivers are in place to sustain the current housing market's slow but steady growth," said Robert I. Toll, executive chairman. He pointed to low interest rates, rising home equity values and constrained supply and said "the industry is still not building enough homes to meet the demand that current demographics imply are needed."

The company narrowed its annual revenue guidance to a range of $4.76 billion to $5.36 billion; the previous projection was $4.6 billion to $5.4 billion. Analysts polled by Thomson Reuters predicted $5.01 billion, on average, in revenue for the year.

For the quarter ended April 30, Toll posted a profit of $89.1 million, or 51 cents a share, up from $67.9 million, or 37 cents a share, in the year-prior period. Analysts surveyed by Thomson Reuters were expecting earnings of 46 cents a share.

Revenue rose 31% to $1.12 billion. Analysts estimated $1.04 billion in revenue, according to FactSet.

Results in the second quarter were driven by growth in the West, including Denver, Seattle, Reno and Las Vegas. On the East Coast, the company pointed to solid results from New Jersey, Northern Virginia, Maryland and Pennsylvania.

California was a weak spot for the quarter, with a decrease of 25% in units, hurt by what Chief Executive Douglas Yearley Jr. called a "temporary lack of inventory for sale."

"We believe the California market is still strong," Mr. Yearley said.

Revenue from Toll's City Living division, which builds urban apartments, increased more than fourfold to $54 million. The segment, much smaller than Toll's other units, represents a new segment for the company as the U.S. continues to urbanize.

Backlog jumped 20% to $4.19 billion during the period as contracts rose 3%.

In February, Toll Brothers said its eponymous vice chairman, Bruce Toll, would retire from the company he co-founded with his brother.

Robert and Bruce Toll started Toll Brothers in 1967 in Pennsylvania. The company has focused on building more-customized and higher-end homes than competitors. The brothers took the company public in July 1986.

The homes in their first community in Chester County sold for an average of $20,000. The company said the average price of a home delivered in its second quarter was $855,500, up from $713,500 a year ago.

Shares of Toll Brothers, which have fallen 28% to $27.10 over the past 12 months, rose 3.3% to $28 in premarket trading.

Write to Joshua Jamerson at joshua.jamerson@wsj.com

(END) Dow Jones Newswires

May 24, 2016 07:45 ET (11:45 GMT)

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