(Removes wrong reference to "raised" FY revenue forecast in headline and first paragraph; corrects reference to homes sales forecast to "narrowed" from "raised" in sixth paragraph)
* Third qtr profit, rev beat estimates
* Orders up 7.1 pct, average home price up 7.6 pct
* Sees 2018 rev of $6.76 bln-$7.22 bln
* Shares up 12 percent
Aug 21 (Reuters) - Toll Brothers Inc on Tuesday reported better-than-expected quarterly results on strong demand for its luxury homes, sending its shares up 12 percent.
The results underscore strength in the U.S. homebuilding sector as robust demand, fueled by a stronger economy and low unemployment rates, cushions the impact of higher construction costs, labor shortages and rising interest rates.
Toll said it now expects full-year revenue of between $6.76 billion and $7.22 billion, compared with an earlier forecast of between $6.64 billion and $7.31 billion.
"We believe there is room for continued growth in the new home market in the coming years," Executive Chairman Robert Toll said, adding that the company is seeing new demand from millennials starting to buy homes.
California, where Toll typically sells higher priced homes, accounted for 16.3 percent of total home sales this quarter. While the California market is not as hot as it was a year ago, it is still one of Toll's stronger markets, the company said.
The company narrowed its forecast for the number of homes it expects to sell in fiscal 2018 to between 8,100 and 8,400 units, from between 8,000 and 8,500 units.
Toll also raised the lower end of its full-year average price forecast to $835,000 from $830,000, keeping the higher end at $860,000.
The average price of a Toll home rose 7.6 percent to $851,900 in the third quarter ended July 31, its highest growth in four quarters.
Pennsylvania-based Toll booked orders for 2,316 homes in the quarter, up 7.1 percent year-over-year, while selling 2,246 homes, an 18.3 rise year-over-year.
Gross margin for the quarter slipped to 21.1 percent from 21.7 percent, as costs including labor and raw materials rose 28.4 percent.
The company's net income rose 30 percent to $193.3 million, or $1.26 per share, while revenue jumped 27.3 percent to $1.91 billion.
Analysts on average had expected earnings of $1.03 per share and revenue of $1.81 billion, according to Thomson Reuters I/B/E/S. (Reporting by Sanjana Shivdas in Bengaluru; Editing by Sai Sachin Ravikumar and Saumyadeb Chakrabarty)