Toll Brothers reports improved earnings, but revenues declined 13% from one year earlier. (Why is that not suprising?)

Toll Brothers is certainly one of the U.S.’ major home builders (and I have long been a huge fan of Toll Brothers; they design and build incredibly beautiful homes.) Here’s a story, out this morning, about Toll Brothers’ results:

NEW YORK (Dow Jones)--Toll Brothers Inc.'s (TOL) fiscal third-quarter earnings jumped 54% with a boost from a bigger tax benefit, yet the luxury home builder saw a double-digit drop in revenue as home deliveries fell.

The housing market is facing continued challenges: Unemployment remains high, bargain-priced foreclosures pose stiff competition and burned lenders have tightened mortgage requirements. Annual new-home sales are on track to hit another record low.

While there's concern recent financial volatility could deliver the hard-hit sector another blow, Toll said it is too early to gauge the effects. "While late summer is generally not the best time to sell homes, in the short run, the stock market gyrations, the budget impasse, and the U.S. Government bond rating downgrade are certainly not helping consumer confidence," Chief Executive Douglas C. Yearley Jr. said in the pre-market release.

For the quarter ended July 31, Toll Brothers reported a profit of $42.1 million, or 25 cents a share, up from $27.3 million, or 16 cents a share, a year earlier. The current-year period included pretax write-downs of $20.2 million, while the year-ago period included pretax write-downs and charges totaling $13.2 million.

Revenue declined 13% to $394.3 million. Analysts polled by Thomson Reuters expected earnings of 3 cents a share on $404 million in revenue.

Gross margin slipped to 13.8% from 14.2% a year earlier.

Toll, one of the nation's largest home builders, delivered 693 homes, a 14% decrease from a year earlier. The average price of net signed contracts was $570,000, roughly the same as the prior-year period.

The cancellation rate, defined as cancellations divided by signed contracts, was 7.4% versus 6.2% a year earlier.

Contracts climbed 2% from the prior year, missing some analyst estimates.

Demir Gjokaj, a senior analyst with ITG Investment Research, viewed Toll's results as worrisome for the sector.

"I'm not liking what I'm seeing," he said. "If Toll's getting weak, and they've always been located in the strongest regions and have the strongest buyer segments, it definitely casts a shadow on the rest of the group coming into the third quarter."

Toll Bros.' shares were up 4.2% at $15.36 in recent trading.

-By Mia Lamar and Dawn Wotapka, Dow Jones Newswires; 212-416-3207; mia.lamar@dowjones.com