(Bloomberg) -- Toll Brothers Inc. raised its fiscal full-year outlook as the luxury builder reported stronger-than-expected orders with buyers, starved for inventory of previously owned properties, flocking to newly built homes.

  • For the three months through April, purchase contracts rose 30% from the same period a year earlier to 3,041, the company said Tuesday in a statement. Analysts in a Bloomberg survey expected 3,004 orders on average.

Key Insights

  • Toll boosted its full fiscal-year deliveries guidance to 10,400 to 10,800 units, up from a previous forecast for 10,000 to 10,500 units.
  • Mortgage rates hovering above 7% have driven buyers to homebuilders that have been offering incentives to help move inventory. The company’s adjusted home-sales gross margin slipped slightly from a year earlier to 28.2% in its fiscal second quarter, but was higher than the company’s earlier forecast of 27.6%.
  • Toll often caters to more affluent buyers who are more likely to be paying cash. That helps blunt some of the impact of higher rates on Toll’s demand. And the company said its strategy of including “more affordable luxury” properties and boosting its supply of spec homes is helping increase its market share.

Market Reaction

  • Toll shares have nearly doubled in the past 12 months through Tuesday’s close, outpacing the 47% gain in an S&P index of homebuilder stocks.

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