It's a classic Wall Street head-scratcher: a company beats expectations, raises its outlook, and the stock still takes a hit. That's the situation for The Toro Company (TTC) today, as shares trade lower despite a solid fiscal third-quarter report.
Toro Beats Estimates, Raises Guidance, Yet Stock Drops: Here's Why
MarketDash
The Toro Company (TTC) delivered a Q3 earnings beat and raised its full-year outlook, but shares fell 6.7%. Find out what's weighing on the stock despite the good news.
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Earnings Beat Estimates
Adjusted earnings came in at $1.33 per share, beating the $1.31 analyst estimate. Sales of $1.223 billion also topped the consensus estimate of $1.191 billion, with revenue up 8.4% year over year, including 6.2% organic growth.
Digging into the numbers, the quarter included a 12-cent benefit from operational performance, 5 cents from share repurchases, and 6 cents from tariff refunds. Adjusted operating margin expanded 30 basis points to 13.9%, with the company crediting its AMP productivity initiative for much of the improvement. Toro expects the program to exceed its $125 million run-rate savings target by year-end.
Inventory fell by $153 million from a year earlier, while working capital improved by $217 million. The company also generated $425 million in free cash flow year to date and repurchased $358 million of shares.
Professional Sales Rise, Margins Slip
Breaking down the segments, Professional segment sales rose 8.8%, including 6.1% organic growth. However, adjusted operating margin fell 40 basis points to 20.9%, hurt by product mix and higher manufacturing costs.
Residential sales increased 8.6%, with adjusted operating margin jumping 400 basis points to 5.9%, helped by productivity gains, pricing, higher volumes, and a favorable year-over-year comparison.
Landscape contractor sales grew by double digits, while Underground and Specialty Construction sales increased by mid-single digits. Golf shipments declined modestly against a strong prior-year comparison, though the company noted industry fundamentals remain healthy.
Professional growth got a boost from the redesigned Exmark Radius zero-turn mower and GrandStand Multi Force line. Ventrac continued to gain traction with landscape contractors and acreage homeowners, and demand for its new fence post mower exceeded the initial production run. Underground Construction grew by mid-single digits, with HammerHead Blue Light pipe-relining solutions up more than 30% year to date.
Toro Raises Full-Year Outlook
Looking ahead, Toro raised its fiscal 2026 adjusted EPS guidance to $4.60-$4.65 from $4.50-$4.62, compared to the consensus estimate of $4.61. The company also increased its sales outlook to $4.794 billion-$4.808 billion from $4.691 billion-$4.804 billion, now above the $4.762 billion consensus. Full-year sales growth is now expected at 6.3%-6.6%, up from the prior 4%-6.5% range.
The guidance implies fourth-quarter sales growth of 3.9%-5.1% and adjusted EPS of 93 cents to 98 cents. The forecast includes $7 million of anticipated IEIPA tariff refunds, down from $12 million previously expected.
During the earnings call, Toro said its AMP productivity initiative has already reached its $125 million run-rate savings target, but tariffs and commodity inflation have absorbed some of those gains. CFO Angie Drake explained that the company isn't realizing the full benefit of the savings in fiscal 2026 because a portion has been used to offset those cost pressures. However, Toro expects the savings to support continued margin expansion as they carry into fiscal 2027.
TTC Price Action: Toro shares were down 6.70% at $92.50 at the time of publication on Thursday, according to market data.
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