Toro (TTC) Tops Q2 Earnings & Revenues, Raises FY17 Outlook

The Toro Company (NYSE:TTC) reported second-quarter fiscal 2017 (ended May 5, 2017) results, wherein earnings improved over 14.9% to $1.08 per share from 94 cents recorded in the year-ago quarter. Further, earnings beat the Zacks Consensus Estimate of $1.03.

Toro’s net sales increased 4.3% year over year to $873 million in the quarter. The top line also came ahead of the Zacks Consensus Estimate of $848 million.

Operational Update

Cost of sales in the quarter went up 4% year over year to $556.4 million. Gross profit came in at $316 million, up 4% year over year. Gross margin remained flat year over year to 36.2%. Selling, general and administrative expenses increased 6% to $157 million. Operating profit improved 2.7% year over year to $159.3 million. Operating margin came in at 18%, down 50 bps year over year.

Segment Performance

The Professional segment’s sales increased 2.6% year over year to $610.9 million. The increase was due largely to strong demand for products in our golf equipment and rental businesses. Operating profit at the segment was $149 million, up 5.2% from $141.6 million in the year-ago quarter.

Net sales at the Residential segment grew 8.4% year over year to $258 million. The sales increase was primarily due to solid demand for its walk power mowers in the mass channels and for zero-turn riding mowers in dealer network. Operating profit at the segment was $35 million, flat year over year.

Financial Update

Toro had cash and cash equivalents of $265.2 million at the end of the fiscal second quarter compared with $174.6 million recorded in the prior-year quarter. The company generated cash flow from operations of $170.4 million for the six-month period ended May 5, 2017, compared with $148.4 million recorded in the comparable period last year.

Long-term debt, excluding the current portion, was $312 million as of May 5, 2017, compared with $334.8 million as of Apr 29, 2016.

Outlook

Toro raised its guidance for fiscal 2017. The company projects revenue growth of around 4.5% and net earnings to be about $2.35 per share. For third-quarter fiscal 2017, it expects net earnings to be about 56 cents per share.

In the second half of the fiscal year, Toro will deliver value-added innovations in the markets and industries, while maintaining operational flexibility and prudently managing expenses. Further, its golf equipment business continues to perform well as customers enhance their fleets with innovative turf solutions. In addition, the company remains focused on delivering innovative products. However, unfavorable weather conditions could adversely affect demand throughout the fiscal year.

Share price Performance

Shares of Toro have outperformed the Zacks categorized Tools-Hand Held industry over the past one year. In fact, Toro’s shares have gained 49.4%, while the industry logged in a return of around 16.8% over the same period.

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

Some better-ranked stocks in the same sector include The Dixie Group, Inc. (NASDAQ:DXYN) , Cherokee Inc. (NASDAQ:CHKE) and Care.com, Inc. (NYSE:CRCM) . All of the three stocks boast a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dixie Group has a remarkable average positive earnings surprise of 102.38% for the trailing four quarters. Cherokee generated a whopping average positive earnings surprise of 165.73% over the last four quarters, while Care.com has an average positive earnings surprise of 43.18% for the same period.

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