The company appears to be successfully navigating through a tough period.
Outdoor-equipment manufacturer Toro Co. (TTC 14.40%) beat expectations for the quarter and provided signs that its end markets are stabilizing. Investors were encouraged by the update, sending Toro shares up 8% as of 10 a.m. ET.
Better-than-expected results in a tough environment
Toro is a maker of professional and residential lawn care and snow removal equipment, as well as construction machinery. The company earned $1.40 per share in its fiscal second quarter on revenue of $1.35 billion, topping Wall Street’s $1.29 per share on a $1.34 billion consensus estimate.
Revenue was flat year over year and earnings were down, but that was expected. Toro experienced a wave of inventory restocking early last year that was unsustainable over the long term and is now waiting for dealers to work through all the inventory that was acquired.
CEO Richard Olson said in a statement:
We realized exceptional growth in our residential segment due to our strong mass channel, successful new product introductions, and better weather conditions compared to last year. Importantly, we made significant progress in reducing dealer field inventories of lawn care equipment in both the residential and professional segment, a result of lower shipments to that channel, coupled with spring retail momentum.
Is Toro a buy after its earnings report?
Toro shares were about 20% off from their highs for the year coming into earnings as investors focused on the potential downsides of a cyclical business. The latest numbers should put to rest some of the concerns that the company’s business is in freefall.
The company backed its previous guidance for full-year earnings of between $4.25 and $4.35 per share, offering some potential upside to Wall Street’s $4.26 per share consensus. Revenue is expected to come in higher in the low single digits for the year. In the second half of 2024, the comparisons will be easier and inventories should continue to stabilize.
There’s still work to be done, but Toro appears to be moving in the right direction.