Toro Co.’s TTC earnings per share increased 9% to a record $1.64 in the second-quarter of fiscal 2015 (ended May 1, 2015) from $1.51 a share in the year-ago quarter due to favorable spring weather that helped to generate robust retail sales. Earnings, however, fell short of the Zacks Consensus Estimates of $1.66 per share.
 

The Toro Company - Earnings Surprise | FindTheCompany

Operational Update

Sales grew 11% year over year to a record $826 million, beating the Zacks Consensus Estimate of $807 million. Cost of sales rose 13% to $544 million from $480 million in the year-ago quarter. Gross profit increased 7% year over year to $282 million. Gross margin contracted 140 basis points (bps) year over year to 34.1% due to unfavorable foreign currency exchange rates and segment mix impact of stronger sales in the residential segment.

Selling, general, and administrative expenses went up 7% year over year to $143 million. Operating profit grew 6% year over year to $138.5 million. Operating margin contracted 80 bps year over year to 16.8%.

Segmental Performance

Professional: Net sales for this segment grew 5% year over year to $552 million. Incremental sales of the recently acquired BOSS snow and ice management products contributed to the growth. Moreover, sales of landscape maintenance equipment increased due to solid retail demand for the professional zero-turn riding and walk behind mowing platforms and new turf management products. Domestic golf sales also grew on strong channel and retail demand for the company’s innovative application equipment and vehicles. The segment posted earnings of $121 million, down 1% from the prior-year quarter.

Residential: This segment reported sales of $268 million, up 27% year over year, attributable to strong retail demand for Toro’s innovative product line-up, including its new platform of residential zero-turn riding mowers and new all-wheel drive walk power mower, as well as expanded retail placement of such products. The segment reported earnings of $34.8 million, up 46% year over year.

Financial Update

Toro had cash and cash equivalents of $109 million at the end of the quarter compared with $129 million at the end of the prior-year quarter. The company generated cash flow from operations of $95 million in the second quarter compared with $78 million in the prior-year quarter.

Long-term debt was $361 million as of May 1, 2015, up from $223.8 million as of May 2, 2014. The debt-to-capitalization ratio was 47% as of May 1, 2015 compared with 37% as of May 2, 2014.

Outlook

For fiscal 2015, Toro maintained its revenue growth guidance of around 8% to 10%. The company expects its net earnings per share for the year to be in the range of $3.35–$3.45. For the third quarter of fiscal 2015, the company expects net earnings to be about 85 cents to 90 cents per share.

Toro is well-positioned with its portfolio of innovative products to drive additional sales and gain market share. The company has successfully launched its Reelmaster 5010-H hybrid fairway mower for the golf market, and the new Dingo TX 1000 compact utility loader for the landscape contractor and rental markets that will be released in the third quarter looks promising based on early customer demand. The company had benefitted from two consecutive favorable summer growing seasons in 2013 and 2014 and may not do so again this year. Unfavorable foreign currency also continues to be a headwind.

Bloomington, MN-based Toro is a worldwide provider of turf and landscape maintenance equipment as well as irrigation solutions for golf courses, sports fields, public green spaces, commercial and residential properties and agricultural fields. The company operates through two segments: Professional and Residential.

Toro currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in same sector include Snap-on Incorporated SNA, AO Smith Corp. AOS and Capstone Turbine Corp. CPST. All these stocks carry a Zacks Rank #2 (Buy).

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