Toro Company (TTC) shares took a significant hit in pre-market trading on Thursday after the company released its third-quarter financial results. The report revealed that sales fell short of analyst expectations, leading to a decline in the company’s stock price.
Sales for the quarter reached $1.156 billion, representing a 6.9% year-over-year increase. However, this figure missed the consensus estimate of $1.259 billion. The company’s Professional segment, which generated $880.9 million in revenue, experienced a 1.7% year-over-year decline. In contrast, the Residential segment saw strong growth, with sales surging 52.6% to $267.5 million.
Despite the sales shortfall, Toro’s adjusted earnings per share (EPS) came in at $1.18, reflecting a 24.2% year-over-year increase. However, this figure also fell short of the consensus estimate of $1.22.
On a positive note, the company’s adjusted gross margin expanded to 35.4% from 34.4% in the previous year, driven by productivity improvements and net price realization. The adjusted operating margin for the third quarter also improved to 13.7%, up from 12.2% in the same period last year. As of August 2, Toro held $221.1 million in cash and equivalents.
Toro’s CEO, Richard M. Olson, attributed the lower-than-expected shipments to increased caution from homeowners and lawn care dealers as the summer progressed. These macro factors, according to Olson, led to weaker demand for both residential and professional lawn care products.
Looking ahead, Toro revised its fiscal 2024 outlook. The company now expects company net sales growth of about 1%, down from its previous forecast of low single-digit growth. The adjusted EPS forecast has also been lowered to a range of $4.15 to $4.20, compared to the prior estimate of $4.25 to $4.35. This revised outlook falls short of the consensus estimate of $4.30.
Despite the revised outlook, Olson remains optimistic about Toro’s future. He highlighted the benefits of the company’s multi-year productivity initiative, named AMP, which is expected to accelerate in the next two years. Toro aims to achieve at least $100 million in annualized run rate savings by fiscal 2027.
Olson emphasized that Toro is well-positioned in attractive end markets and looks forward with optimism to fiscal 2025 and beyond.
Investors seeking exposure to Toro’s stock can consider ETFs such as the Invesco Water Resources ETF (PHO) and the Neuberger Berman Small-Mid Cap ETF (NBSM).
