The company, whose homes can cost more than $2 million, also raised the low end of its average selling price by $5,000 to $730,000. The upper end was retained at $760,000.

However, second-quarter revenue fell short of the average analyst estimate as the number of homes sold in the company's West market fell 7 percent.

The market consists of Arizona, California, Colorado, Nevada and Washington.

Total number of homes handed over fell 2 percent to 1,195.

The company's shares fell as much as 3.7 percent to $35.63 on the New York Stock Exchange on Wednesday.

Toll Brothers said average selling price rose 1 percent to $713,500 in the second quarter ended April 30.

"The economy and housing continue on parallel paths of recovery," Executive Chairman Robert Toll said. "It appears the housing market is on firm footing and heading in the right direction."

Net orders, a key metric of future revenue for homebuilders, rose 10.4 percent in the quarter.

The company narrowed its forecast for full-year home completions to 5,300-5,900 homes from 5,200-6,000.

Net income rose to $67.9 million, or 37 cents per share, from $65.2 million, or 35 cents per share, a year earlier.

The company said it had reversed tax reserves of $13.7 million in the quarter due to a favorable settlement of a state tax liability.

Total revenue fell 1 percent to $852.6 million.

Analysts on average had expected earnings of 35 cents per share and revenue of $861.1 million, according to Thomson Reuters I/B/E/S.

The company's shares were down 2.2 percent at $36.15 in afternoon trading.

Up to Tuesday's close of $36.99, the stock had risen about 4 percent in the past 12 months, compared with the 11 percent rise in the Dow Jones U.S. home construction index <.DJUSHB>.

(Reporting by Ankit Ajmera and Rishika Sadam in Bangalore; Editing by Anupama Dwivedi and Sriraj Kalluvila)