Back to top

Analyst Blog

Toro Co.’s (TTC - Snapshot Report) earnings increased 1.5% to 68 cents per share in the third quarter of fiscal 2013 from 67 cents in the year-ago quarter. The results were ahead of the Zacks Consensus Estimate of 65 cents. The results benefited from the improved market condition and increased demand for residential and landscape contractor products.

Operational Update

Sales grew 1.2% year over year to $509.9 million in the quarter, but missed the Zacks Consensus Estimate of $515 million. The year-over-year growth was led by favorable weather conditions resulting in increase improved retail sales particularly in the Residential business.

Cost of sales increased to $332 million from $325 million in the year-ago quarter. Gross profit remained flat year over year at $178 million. Gross margin contracted 40 basis points (bps) year over year to 34.9%, due to product mix, partly offset by favorable commodity costs, productivity gains and pricing.

Selling, general, and administrative expense rose 1.9% year over year to $119.4 million due to higher warehousing expense, incremental costs from acquisitions, increased engineering spending, partly compensated by lower warranty expense. Operating profit fell 3.9% to $58.5 million from $60.9 million in the prior-year quarter. Consequently, operating margin contracted 60 bps year over year to 11.5%.

Segment Performance

Professional: Net sales at the segment declined 4.8% year over year to $343.9 million, primarily from moving traditional third quarter sales forward to the first quarter of the year due to the Tier 4 diesel engine transition. This was partly offset by favorable weather conditions and new product offerings. The growth was also driven by a rise in sales of rental and construction equipment based on improved demand. Professional segment posted earnings of $60.5 million, down 14.2% from the prior-year quarter.

Residential: The segment reported sales of $155.5 million, up 14.4% year over year, attributable to favorable weather conditions which had a positive impact on the sales of all summer products, including riding products, walk power mowers, handheld trimmer and blower. Consequently, the residential segment recorded earnings of $15.1 million, up 50% from the prior-year quarter.

Financial Update

Cash and cash equivalents were $161 million as of Aug 2, 2013 compared with $143 million as of Aug 3, 2012. Cash flow from operating activities was $121.4 million in the third quarter compared with $75.9 million in the prior-year quarter.

Long-term debt amounted to $223.5 million as of Aug 2, 2013, compared with $225 million as of Aug 3, 2012. The debt-to-capitalization ratio contracted to 37% as of Aug 2, 2013 from 40% as of Aug 3, 2012.

Outlook

Toro revised its revenue growth expectation for fiscal 2013 to around 4% from the previous range of 3% to 4%. The company also modified its earnings outlook to about 2.55 per share from the prior band of $2.40 to $2.45 per share, based on the strength of margin improvement. Toro expected gross margin to be up about 100 basis points year over year for the overall business.

Capital expenditures are expected at about $55 million at the end of the year. The company expects to spend a similar amount for the year on share repurchases as in 2012. The outlook for professional rental and construction businesses remains strong for the balance of the year.

Toro continues to see growth opportunities through the ongoing introduction of innovative products and increased focus on markets like municipal and sports fields. New underground product portfolio is well positioned to grow in international markets. However, foreign exchange volatility and social and political unrest remain headwinds.

Bloomington, Minn.-based Toro Co. is a worldwide provider of turf and landscape maintenance equipment, and irrigation solutions to help customers care for golf courses, sports fields, public green spaces, commercial and residential properties, and agricultural fields. The company operates through its two segments – Professional and Residential.

Toro Co. currently retains a short-term Zacks Rank #3 (Hold).

Peer Performance

Lincoln Electric Holdings Inc. (LECO - Analyst Report) reported second-quarter adjusted earnings of 91 cents per share, up 12% from 81 cents in the year-earlier quarter and slivered past the Zacks Consensus Estimate by a penny.

Snap-on Inc (SNA - Analyst Report) reported second quarter earnings per share of $1.50, beating the  Zacks Consensus Estimate of $1.43 by 4.9% and increasing 15.4% from the prior-year quarter’s earnings of $1.30.

Deere & Company (DE - Analyst Report) reported record third quarter fiscal 2013 (ended Jul 31, 2013) earnings of $996.5 million or $2.56 per share, up roughly 26% from $788 million or $1.98 per share earned in the prior-year quarter. The results were ahead of the Zacks Consensus Estimate of $2.16.
 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%