Financial Performance - The Toro Company's Q3 2025 net sales were $1,131.3 million, a decrease of 2.2% compared to $1,156.9 million in Q3 2024[25] - Adjusted diluted EPS for Q3 2025 was $1.24, a 5.1% increase from $1.18 in Q3 2024[25] - The company repurchased $90 million of its common stock during Q3 2025[6] - The company updated its full-year fiscal 2025 adjusted diluted EPS guidance to approximately $4.15[6] Segment Results - Professional segment net sales increased by 5.7%, from $880.9 million in Q3 2024 to $930.8 million in Q3 2025[27] - Professional segment earnings margin increased by 250 bps, from 18.8% in Q3 2024 to 21.3% in Q3 2025[27] - Residential segment net sales decreased by 27.9%, from $267.5 million in Q3 2024 to $192.8 million in Q3 2025[30] - Residential segment earnings margin decreased by 1030 bps, from 12.2% in Q3 2024 to 1.9% in Q3 2025[30] Cost Savings and Efficiency - The company's AMP initiative is expected to deliver at least $100 million in incremental annualized cost savings by fiscal 2027[22] - Approximately $4 million of run-rate savings were achieved in Q3 2025 through the AMP initiative[24] Tariff Mitigation - The company estimates fiscal 2025 tariff headwinds to be approximately $70 million, down from a prior estimate of approximately $90 million[7] - The company is on track to mitigate 100% of tariff headwinds for full-year 2025[9]

Core Viewpoint - Toro (TTC) reported quarterly earnings of $1.24 per share, exceeding the Zacks Consensus Estimate of $1.22 per share, and showing an increase from $1.18 per share a year ago, representing an earnings surprise of +1.64% [1] - The company posted revenues of $1.13 billion for the quarter ended July 2025, which was below the Zacks Consensus Estimate by 2.02% and a decrease from $1.16 billion year-over-year [2] Group 1: Earnings Performance - Toro has surpassed consensus EPS estimates three times over the last four quarters [2] - The earnings surprise for the previous quarter was +2.9%, with actual earnings of $1.42 per share against an expected $1.38 [1][2] Group 2: Revenue Performance - The company has not been able to beat consensus revenue estimates over the last four quarters [2] - The current consensus EPS estimate for the upcoming quarter is $0.96 on revenues of $1.04 billion, and for the current fiscal year, it is $4.23 on revenues of $4.51 billion [7] Group 3: Stock Performance and Outlook - Toro shares have increased by about 0.5% since the beginning of the year, while the S&P 500 has gained 9.6% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Group 4: Industry Context - The Tools - Handheld industry, to which Toro belongs, is currently in the top 40% of over 250 Zacks industries, suggesting a favorable industry outlook [8]

[Executive Summary](index=1&type=section&id=1.%20Executive%20Summary) [Q3 Fiscal Year 2025 Performance Overview](index=1&type=section&id=1.1%20Q3%20Fiscal%202025%20Performance%20Overview) The Toro Company exceeded adjusted earnings expectations in Q3 FY2025, driven by strong Professional Segment performance with 6% growth and 250 basis points of margin expansion, despite Residential Segment headwinds, with the AMP productivity plan contributing to cost savings - Adjusted earnings exceeded expectations, primarily driven by the strong performance of the Professional Segment, which achieved **6% growth** and **250 basis points of margin expansion**[2](index=2&type=chunk) - Underground construction, golf, and grounds businesses were key drivers of net sales and profitability this quarter[3](index=3&type=chunk) - The AMP productivity plan is progressing well, projected to achieve at least **$100 million** in run-rate savings by 2027[3](index=3&type=chunk) [Key Financial Highlights (Q3)](index=1&type=section&id=1.2%20Key%20Financial%20Highlights%20(Q3)) Q3 FY2025 net sales decreased by 2% year-over-year to $1.13 billion, partly due to last year's non-core asset divestiture, with reported diluted EPS at $0.54 including a non-cash impairment charge related to the Spartan business, while adjusted diluted EPS grew 5% to $1.24, as Professional Segment profit growth offset Residential Segment declines Q3 Fiscal Year 2025 Key Financial Data | Metric | Q3 FY2025 | Q3 FY2024 | YOY Change | | :----- | :--------------- | :--------------- | :------- | | Net Sales | $1.13 billion | $1.16 billion | (2)% | | Reported Diluted EPS | $0.54 | $1.14 | (53)% | | Adjusted Diluted EPS | $1.24 | $1.18 | 5% | - Reported diluted EPS includes a non-cash impairment charge of **($0.62)** per share (pre-tax **($81) million**) reflecting the impact on the Spartan business due to soft homeowner demand and slower-than-expected market recovery[3](index=3&type=chunk) - The company continues to drive free cash flow improvement through favorable net working capital in the third quarter[3](index=3&type=chunk) [Outlook & Fiscal Year 2025 Guidance](index=2&type=section&id=2.%20Outlook%20%26%20Fiscal%202025%20Guidance) [Fiscal Year 2025 Guidance](index=2&type=section&id=2.1%20Fiscal%202025%20Guidance) Management anticipates total company net sales and adjusted diluted EPS for FY2025 to be at the lower end of previous guidance: net sales flat to down 3%, and adjusted diluted EPS of approximately $4.15, with the AMP plan currently saving $75 million annually, targeting at least $100 million by 2027 Fiscal Year 2025 Company Guidance | Metric | FY2025 Guidance | | :----- | :----------- | | Net Sales | Flat to down 3% | | Adjusted Diluted EPS | Approx. $4.15 | - This guidance is based on current visibility, including anticipated tariff impacts, and is at the lower end of the previously provided range[5](index=5&type=chunk) - The AMP plan currently saves **$75 million** annually, targeting at least **$100 million** by 2027, contributing to earnings growth without revenue expansion[4](index=4&type=chunk) [Factors Influencing Outlook](index=2&type=section&id=2.2%20Factors%20Influencing%20Outlook) The FY2025 guidance reflects macroeconomic factors leading to increased homeowner and channel caution and lower volumes; continued strong demand and stable supply in underground construction, golf, and grounds businesses; and weather patterns consistent with historical averages for the remainder of the year - Macroeconomic factors are leading to decreased sales volumes and increased caution among homeowners and channels[6](index=6&type=chunk) - Continued strong demand and stable supply are observed in the underground construction, golf, and grounds businesses[6](index=6&type=chunk) - Weather patterns for the remainder of the year are expected to be consistent with historical averages[6](index=6&type=chunk) [Third-Quarter Fiscal Year 2025 Operating Results](index=2&type=section&id=3.%20Third-Quarter%20Fiscal%202025%20Operating%20Results) Q3 Fiscal Year 2025 Consolidated Operating Metrics | Metric | Q3 FY2025 | Q3 FY2024 | Change (bps) | | :----- | :--------------- | :--------------- | :----------- | | Gross Margin | 33.7% | 34.8% | (110) | | Adjusted Gross Margin | 34.4% | 35.4% | (100) | | SG&A as a % of Net Sales | 20.8% | 22.0% | (120) | | Operating Earnings as a % of Net Sales | 5.7% | 12.8% | (710) | | Adjusted Operating Earnings as a % of Net Sales | 13.6% | 13.7% | (10) | [Consolidated Operating Performance](index=2&type=section&id=3.1%20Consolidated%20Operating%20Performance) Q3 FY2025 gross margin and adjusted gross margin decreased year-over-year, primarily impacted by lower net sales, higher material and manufacturing costs, and inventory valuation adjustments, partially offset by productivity improvements and net price realization, while SG&A as a percentage of net sales improved, and operating earnings and adjusted operating earnings margins varied [Gross Margin and Operating Earnings](index=3&type=section&id=3.1.1%20Gross%20Margin%20and%20Operating%20Earnings) Q3 FY2025 gross margin decreased by 110 basis points to 33.7% (adjusted 34.4%), primarily due to lower sales volumes, increased material and manufacturing costs, and inventory valuation adjustments, partially offset by productivity improvements and net price realization, while SG&A as a percentage of net sales improved from 22.0% to 20.8% year-over-year, mainly driven by cost savings and reduced marketing expenses Gross Margin and SG&A Changes | Metric | Q3 FY2025 | Q3 FY2024 | Change (bps) | | :----- | :--------------- | :--------------- | :----------- | | Gross Margin | 33.7% | 34.8% | (110) | | Adjusted Gross Margin | 34.4% | 35.4% | (100) | | SG&A as a % of Net Sales | 20.8% | 22.0% | (120) | - Gross margin decline was primarily due to lower net sales, higher material and manufacturing costs, and inventory valuation adjustments, partially offset by productivity improvements, net price realization, and product mix optimization[9](index=9&type=chunk) - SG&A improvement was mainly driven by cost savings initiatives and reduced marketing expenses, partially offset by lower net sales[10](index=10&type=chunk) [Interest Expense and Effective Tax Rate](index=3&type=section&id=3.1.2%20Interest%20Expense%20and%20Effective%20Tax%20Rate) Q3 interest expense slightly increased to $15.1 million, primarily due to higher average outstanding borrowings despite a lower average interest rate, while the reported effective tax rate significantly decreased to 7.4%, mainly influenced by the non-cash impairment charge and a more favorable geographic earnings mix, with the adjusted effective tax rate at 17.3% Interest Expense and Effective Tax Rate Changes | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :----- | :--------------- | :--------------- | :----- | | Interest Expense | $15.1 million | $14.5 million | +$0.6 million | | Reported Effective Tax Rate | 7.4% | 17.3% | (990) bps | | Adjusted Effective Tax Rate | 17.3% | 18.0% | (70) bps | - The decrease in reported effective tax rate was primarily due to the impact of the non-cash impairment charge and a more favorable geographic earnings mix[12](index=12&type=chunk) [Segment Performance](index=3&type=section&id=3.2%20Segment%20Performance) The Professional Segment achieved strong growth in both net sales and earnings, primarily driven by increased shipments of underground construction and golf and grounds products, while the Residential Segment experienced significant declines in both net sales and earnings due to soft homeowner demand [Professional Segment](index=3&type=section&id=3.2.1%20Professional%20Segment) Professional Segment net sales grew 5.7% to $930.8 million, primarily driven by increased shipments of underground construction and golf and grounds products and net price realization, with segment earnings increasing to $198.5 million, representing 21.3% of net sales, up from 18.8% last year, benefiting from productivity improvements, net price realization, sales leverage, and cost savings Professional Segment Performance | Metric | Q3 FY2025 | Q3 FY2024 | YOY Change | | :----- | :--------------- | :--------------- | :------- | | Net Sales | $930.8 million | $880.9 million | 5.7% | | Segment Earnings | $198.5 million | $165.7 million | 19.8% | | Earnings as a % of Net Sales | 21.3% | 18.8% | +250 bps | - Net sales growth was primarily driven by increased shipments of underground construction and golf and grounds products and net price realization, partially offset by last year's divested businesses[14](index=14&type=chunk) - Profitability improvement was mainly due to productivity enhancements, net price realization, net sales leverage, cost savings initiatives, and reduced marketing expenses, partially offset by higher material and manufacturing costs[14](index=14&type=chunk) [Residential Segment](index=3&type=section&id=3.2.2%20Residential%20Segment) Residential Segment net sales decreased by 27.9% to $192.8 million, primarily due to lower homeowner demand leading to reduced shipments across the segment, with segment earnings significantly declining to $3.7 million, representing 1.9% of net sales, down from 12.2% last year, mainly impacted by lower sales volumes, higher material and manufacturing costs, inventory valuation adjustments, and increased sales promotions and incentives Residential Segment Performance | Metric | Q3 FY2025 | Q3 FY2024 | YOY Change | | :----- | :--------------- | :--------------- | :------- | | Net Sales | $192.8 million | $267.5 million | (27.9)% | | Segment Earnings | $3.7 million | $32.6 million | (88.7)% | | Earnings as a % of Net Sales | 1.9% | 12.2% | (1030) bps | - Net sales decline was primarily due to decreased homeowner demand leading to reduced shipments across the segment[14](index=14&type=chunk) - Profitability decline was mainly driven by lower net sales, higher material and manufacturing costs, inventory valuation adjustments, and increased sales promotions and incentives, partially offset by productivity improvements and cost savings initiatives[14](index=14&type=chunk) [Financial Statements](index=6&type=section&id=4.%20Financial%20Statements) [Condensed Consolidated Statements of Earnings](index=6&type=section&id=4.1%20Condensed%20Consolidated%20Statements%20of%20Earnings) The condensed consolidated statements of earnings show a significant decrease in net earnings for both the three and nine-month periods ended August 1, 2025, primarily due to reduced net sales and the impact of non-cash impairment charges, with diluted EPS also declining substantially Condensed Consolidated Statements of Earnings Summary | Metric | Three Months Ended August 1, 2025 | Three Months Ended August 2, 2024 | Nine Months Ended August 1, 2025 | Nine Months Ended August 2, 2024 | | :----- | :--------------------- | :--------------------- | :-------------------- | :-------------------- | | Net Sales | $1,131.3 million | $1,156.9 million | $3,444.2 million | $3,507.8 million | | Gross Profit | $381.8 million | $402.8 million | $1,154.1 million | $1,200.3 million | | Operating Earnings | $64.8 million | $148.1 million | $317.4 million | $424.3 million | | Net Earnings | $53.5 million | $119.3 million | $243.1 million | $329.0 million | | Diluted EPS | $0.54 | $1.14 | $2.42 | $3.14 | - A non-cash impairment charge of **$81.1 million** was recorded for both the three and nine-month periods ended August 1, 2025[25](index=25&type=chunk) [Condensed Consolidated Balance Sheets](index=7&type=section&id=4.2%20Condensed%20Consolidated%20Balance%20Sheets) As of August 1, 2025, total company assets were $3.5198 billion, a decrease from $3.7314 billion on August 2, 2024, with key changes including reductions in accounts receivable, inventory, and other intangible assets, while goodwill remained stable, and total shareholders' equity also decreased Condensed Consolidated Balance Sheets Summary | Asset/Liability | August 1, 2025 | August 2, 2024 | October 31, 2024 | | :-------------- | :---------- | :---------- | :----------- | | Total Assets | $3,519.8 million | $3,731.4 million | $3,582.8 million | | Cash and Cash Equivalents | $201.0 million | $221.1 million | $199.5 million | | Inventories, Net | $1,036.2 million | $1,082.0 million | $1,038.9 million | | Other Intangible Assets, Net | $398.6 million | $512.4 million | $498.7 million | | Total Current Liabilities | $955.9 million | $984.4 million | $976.0 million | | Long-Term Debt, Less Current Portion | $1,012.2 million | $966.6 million | $911.8 million | | Total Shareholders' Equity | $1,411.1 million | $1,636.4 million | $1,551.9 million | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=4.3%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine-month period ended August 1, 2025, net cash provided by operating activities increased to $348.9 million from $329.8 million in the prior year, while net cash used in investing and financing activities both increased, primarily due to higher common stock repurchases and debt repayments Condensed Consolidated Statements of Cash Flows Summary | Cash Flow Activity | Nine Months Ended August 1, 2025 | Nine Months Ended August 2, 2024 | | :----------------- | :--------------------- | :--------------------- | | Net Cash Provided by Operating Activities | $348.9 million | $329.8 million | | Net Cash Used in Investing Activities | ($50.7) million | ($43.4) million | | Net Cash Used in Financing Activities | ($298.1) million | ($260.5) million | | Net Increase in Cash and Cash Equivalents | $1.5 million | $28.0 million | | Cash and Cash Equivalents at End of Period | $201.0 million | $221.1 million | - Common stock repurchases significantly increased to **$290 million** during the current nine-month period, compared to **$109.2 million** in the prior year period[31](index=31&type=chunk) [Non-GAAP Financial Measures Reconciliation](index=9&type=section&id=5.%20Non-GAAP%20Financial%20Measures%20Reconciliation) [Reconciliation of Non-GAAP Performance Measures](index=9&type=section&id=5.1%20Reconciliation%20of%20Non-GAAP%20Performance%20Measures) The company provides reconciliation tables for various non-GAAP performance measures, including adjusted gross profit, operating earnings, net earnings, and diluted EPS, calculated by adjusting for productivity initiatives and non-cash impairment charges, demonstrating that adjusted performance is higher than reported GAAP figures Non-GAAP Performance Measures Reconciliation Summary (Three Months Ended August 1, 2025) | Metric | GAAP Reported | Adjustments (Productivity + Impairment) | Adjusted Non-GAAP | | :-------------------------------------- | :------- | :--------------------------------------- | :----------- | | Gross Profit | $381.8 million | $7.2 million (Productivity) | $389.0 million | | Operating Earnings | $64.8 million | $8.1 million (Productivity) + $81.1 million (Impairment) | $154.0 million | | Net Earnings | $53.5 million | $7.7 million (Productivity, after-tax) + $61.4 million (Impairment, after-tax) - $0.1 million (Share-based compensation tax impact) | $122.5 million | | Diluted EPS | $0.54 | $0.08 (Productivity, after-tax) + $0.62 (Impairment, after-tax) + $0.00 (Share-based compensation tax impact) | $1.24 | - A non-cash impairment charge of **$81.1 million** (pre-tax) had a significant impact on reported GAAP earnings[33](index=33&type=chunk) [Reconciliation of Non-GAAP Liquidity Measures](index=10&type=section&id=5.2%20Reconciliation%20of%20Non-GAAP%20Liquidity%20Measures) For the nine-month period ended August 1, 2025, free cash flow increased to $291.9 million from $270.5 million in the prior year, with the free cash flow conversion rate improving from 82.2% to 90.0%, indicating enhanced ability to convert adjusted net earnings into cash Non-GAAP Liquidity Measures Reconciliation Summary (Nine Months Ended) | Metric | August 1, 2025 | August 2, 2024 | | :------------------------- | :---------- | :---------- | | Net Cash Provided by Operating Activities | $348.9 million | $329.8 million | | Less: Purchases of Property, Plant and Equipment, Net of Insurance Claim Proceeds | $57.0 million | $59.3 million | | Free Cash Flow | $291.9 million | $270.5 million | | Net Earnings, Excluding Non-Cash Impairment Charge | $324.2 million | $329.0 million | | Free Cash Flow Conversion Rate | 90.0% | 82.2% | [Non-GAAP Adjustments Footnotes](index=10&type=section&id=5.3%20Non-GAAP%20Adjustments%20Footnotes) This section details the rationale for non-GAAP adjustments, including the 'Amplify Productivity' (AMP) initiative, non-cash impairment charges related to the Spartan trademark, and the tax impact of share-based compensation - AMP initiative expenses primarily include severance and termination benefits, facility exit costs, AMP dedicated personnel compensation, third-party consulting fees, and product line exit costs, which are considered unusual, non-recurring operating expenses[35](index=35&type=chunk) - At the end of Q3 FY2025, the company recorded a non-cash impairment charge related to the Spartan trademark[35](index=35&type=chunk) - The tax impact of share-based compensation refers to discrete tax benefits recorded as excess tax deductions for share-based compensation, which amounts may be unpredictable[35](index=35&type=chunk) [Corporate Information & Disclosures](index=4&type=section&id=6.%20Corporate%20Information%20%26%20Disclosures) [About The Toro Company](index=4&type=section&id=6.1%20About%20The%20Toro%20Company) The Toro Company is a leading global provider of outdoor environment solutions, with $4.6 billion in net sales for FY2024, operating in over 125 countries through its brands, offering solutions for turf and landscape maintenance, snow and ice management, underground utility construction, rental and specialty construction, and irrigation and outdoor lighting - The company is a leading global provider of outdoor environment solutions, covering turf and landscape maintenance, snow and ice management, underground utility construction, rental and specialty construction, and irrigation and outdoor lighting solutions[16](index=16&type=chunk) - FY2024 net sales were **$4.6 billion**, operating in over **125** countries through brands like Toro, Ditch Witch, Exmark, and Spartan[16](index=16&type=chunk) [Use of Non-GAAP Financial Information (Methodology)](index=4&type=section&id=6.2%20Use%20of%20Non-GAAP%20Financial%20Information%20(Methodology)) This section explains the company's use of non-GAAP financial measures to supplement GAAP information, providing insights into core operating performance and cash flow, utilized for internal decision-making, liquidity assessment, and facilitating comparisons by excluding non-recurring or unpredictable expenses and gains, with no quantitative reconciliation provided for FY2025 adjusted diluted EPS guidance due to inherent uncertainties and unpredictability of certain excluded items - Non-GAAP financial measures, such as adjusted gross profit, operating earnings, diluted EPS, and free cash flow, supplement GAAP information, providing useful insights into core operating performance and cash flow[17](index=17&type=chunk)[18](index=18&type=chunk) - These measures aid in operational decision-making, liquidity assessment, and internal and competitor performance comparisons by excluding non-cash, significant, and/or unpredictable expenses and gains unrelated to regular, ongoing business[18](index=18&type=chunk) - The company does not provide a quantitative reconciliation for its FY2025 adjusted diluted EPS guidance, citing the unreasonable efforts exception under Regulation S-K Item 10(e)(1)(i)(B), as certain excluded items are inherently uncertain and difficult to predict[20](index=20&type=chunk)[21](index=21&type=chunk) [Forward-Looking Statements](index=5&type=section&id=6.3%20Forward-Looking%20Statements) This press release contains forward-looking statements based on management's current assumptions and expectations of future events, subject to risks and uncertainties that could cause actual events and results to differ materially from projections, and the company undertakes no obligation to revise or update any forward-looking statements - Forward-looking statements are based on management's current assumptions and expectations but involve risks and uncertainties that could cause actual events and results to differ materially from projections[22](index=22&type=chunk) - Specific risks and uncertainties include adverse global economic conditions (including inflationary pressures and high interest rates), weather impacts, customer spending levels, commodity cost fluctuations, manufacturing or operational disruptions, acquisition and disposition risks (including potential future impairment charges for the Spartan trademark), the impact of the AMP initiative, geopolitical factors, and changes in government policies and regulations[22](index=22&type=chunk) [Live Conference Call Details](index=4&type=section&id=6.4%20Live%20Conference%20Call%20Details) The Toro Company will host an earnings conference call and webcast on September 4, 2025, at 10:00 AM CT, with webcast participants required to complete a brief registration form - The earnings conference call and webcast are scheduled for September 4, 2025, at **10:00 AM CT**[15](index=15&type=chunk) - The webcast will be available at www.thetorocompany.com/invest, requiring participants to complete a registration[15](index=15&type=chunk)

Financial Performance & Goals - In fiscal year 2021, The Toro Company (TTC) achieved net sales of $3.96 billion[19] - The company aims to exceed $5 billion in net sales by the end of fiscal year 2024 through organic growth[60] - The company also aims to exceed $750 million in annual adjusted operating earnings by the end of fiscal year 2024[60] - For the second quarter of fiscal year 2022, net sales reached $1.25 billion, an increase of 8.7% compared to the same period in fiscal year 2021[71] - For the first six months of fiscal year 2022, net sales were $2.182 billion, a 7.9% increase year-over-year[72] - The company anticipates net sales growth of 14% to 16% for fiscal year 2022[76] Segment Breakdown (Fiscal Year 2021) - Professional segment accounted for 74% of net sales, totaling $2.93 billion, with segment earnings at 17.3%[20] - Residential segment accounted for 26% of net sales, totaling $1.01 billion, with segment earnings at 12.0%[20] - In terms of geographic market, 79% of sales were from the United States, and 21% were international[20] Capital Allocation & Returns - The company targets a gross debt-to-EBITDA ratio of 1-2x[80] - The company's return on average invested capital for fiscal year 2021 was 20.8%[86] - The company's return on average equity for fiscal year 2021 was 32.7%[86]

Company Overview - Toro (TTC) is headquartered in Bloomington and operates in the Consumer Discretionary sector, experiencing a price change of -7.97% year-to-date [3] - The company currently pays a dividend of $0.76 per share, resulting in a dividend yield of 2.06%, which is slightly below the Tools - Handheld industry's yield of 2.15% and above the S&P 500's yield of 1.54% [3] Dividend Performance - Toro's annualized dividend of $1.52 has increased by 5.6% from the previous year, with a history of five dividend increases over the last five years, averaging an annual increase of 10.22% [4] - The company's current payout ratio is 36%, indicating that it distributes 36% of its trailing 12-month earnings per share as dividends [4] Earnings Outlook - For the fiscal year, Toro is expected to achieve solid earnings growth, with the Zacks Consensus Estimate for 2025 projected at $4.23 per share, reflecting a 1.44% increase from the previous year [5] Investment Considerations - Toro is considered a compelling investment opportunity due to its strong dividend profile and current Zacks Rank of 3 (Hold), appealing to income investors despite the challenges posed by rising interest rates [7]

Company Overview - Toro (TTC) is headquartered in Bloomington and operates in the Consumer Discretionary sector [3] - The stock has experienced a price decline of 15.92% since the beginning of the year [3] - Toro currently pays a dividend of $0.38 per share, resulting in a dividend yield of 2.26%, which is higher than the Tools - Handheld industry's yield of 2.14% and the S&P 500's yield of 1.57% [3] Dividend Performance - The current annualized dividend of Toro is $1.52, reflecting a 5.6% increase from the previous year [4] - Over the past five years, Toro has raised its dividend five times, achieving an average annual increase of 10.22% [4] - The company's payout ratio stands at 36%, indicating that it distributes 36% of its trailing 12-month earnings per share as dividends [4] Earnings Growth - The Zacks Consensus Estimate for Toro's earnings per share for the fiscal year 2025 is $4.23, which signifies a year-over-year growth rate of 1.44% [5] Investment Considerations - Dividends are favored by investors for various reasons, including tax advantages and reduced overall portfolio risk [6] - High-growth firms or tech start-ups typically do not offer dividends, while established companies with stable profits are often preferred for dividend investments [7] - Despite the challenges high-yielding stocks may face during rising interest rates, Toro presents a compelling investment opportunity as a strong dividend play [7]

Market Overview - The VIX index spiked 12% due to a better-than-expected auction for 10-year notes, raising fears of a stock market selloff [2] - Following geopolitical unrest in the Middle East, the VIX surged another 14% [2] - The S&P 500 has been relatively flat, while one of the highlighted swing trades rose 4% [2] Company Analysis: Lululemon Athletica Inc. (LULU) - Lululemon has faced significant challenges due to "Liberation Day" tariffs, leading to a 35% decline in stock price this year [5][6] - The company trimmed its full-year earnings guidance by 2%, which contributed to a 22% drop in shares after the first-quarter earnings call [6] - Currently, Lululemon trades at 17 times forward earnings, which is 40% below its historical averages [7] - Recent tariff rollbacks between the U.S. and China may positively impact Lululemon's supply chain [8] - The U.S. Consumer Sentiment Index increased to 60.5, indicating a potential rebound in consumer spending, which is crucial for Lululemon [9] - TradeSmith's quantitative system forecasts an 11% upside for Lululemon over the next 30 days [10] Company Analysis: The Toro Co. (TTC) - Toro's shares have dropped 30% over the past year due to slowing revenue growth and shrinking margins [13] - The company now trades at 16.5 times forward earnings, the lowest since 2012, indicating a potential buying opportunity [14] - TradeSmith's system predicts a 10% increase in share prices over the next 30 days, supported by positive signals from home improvement retailers [15] Company Analysis: Alphabet Inc. (GOOG) - Alphabet is projected to have a 17.5% upside over the next 30 days, despite a recent downgrade [18] - The company dominates the search engine market with a 90% market share and has strong operations in cloud computing and streaming services [20] - Alphabet's valuation is currently subdued due to a conglomerate discount and ongoing antitrust lawsuits [21][24] - The company's AI-focused cloud business is expected to enhance its valuation by aligning its diversified businesses [21] - Alphabet trades at 18.5 times forward earnings, below the median of other major tech firms [25]

Core Insights - The Toro Company reported adjusted EPS of $1.42 for fiscal Q2 2025, a $0.02 increase year-over-year, but revenue declined by 2.3% to $1.32 billion, prompting management to revise full-year guidance to flat to down 3% [1] Financial Performance - The professional segment achieved $1.0 billion in net sales, reflecting a 1% year-over-year growth, and earnings of $202 million, up 6% year-over-year, with a margin improvement of 90 basis points to 19.9% [4][5] - The residential segment's net sales fell 11% year-over-year to $297 million, with earnings halved to $16 million and margins dropping to 5.4% from 10.8% [6][7] Cost Management Initiatives - The Accelerated Margin Productivity (AMP) program has generated $70 million in cumulative run-rate savings, with a target of $100 million by 2027, addressing increased material and manufacturing costs [2][3] Market Outlook - Management anticipates total net sales in fiscal Q3 to be flat to slightly up year-over-year, with professional segment sales expected to rise by a mid-single-digit percentage and residential sales projected to decline by a high-teens percentage [9]

Core Insights - The Toro Company reported mixed results for Q2 FY2025, with sales declining 2% year-over-year to $1.32 billion, missing the consensus estimate of $1.35 billion, while adjusted EPS of $1.42 increased by 1% year-over-year, surpassing the consensus of $1.40 [1][2] Financial Performance - Q2 FY2025 sales: $1.32 billion, down 2% Y/Y, below consensus of $1.35 billion [1] - Adjusted EPS: $1.42, up 1% Y/Y, above consensus of $1.40 [1] Guidance Update - FY25 adjusted EPS guidance lowered from $4.25-$4.40 to $4.15-$4.30, compared to consensus of $4.31 [2] - FY25 net sales growth outlook revised to flat to -3%, down from 0% to 1% previously [2] Management Commentary - CEO Richard M. Olson emphasized the company's strategic steps to navigate near-term challenges, highlighting confidence in managing controllable factors and mitigating macroeconomic risks [3] Market Reaction - Toro shares fell 6.5% to $68.51 following the earnings announcement [3] Analyst Ratings and Price Targets - Baird analyst Timothy Wojs maintained a Neutral rating, lowering the price target from $85 to $82 [8] - Northland Capital Markets analyst Ted Jackson downgraded Toro from Outperform to Market Perform, reducing the price target from $100 to $80 [8] - Raymond James analyst Sam Darkatsh maintained an Outperform rating, lowering the price target from $95 to $90 [8]

Financial Performance - Consolidated net sales for Q2 fiscal 2025 were $1,317.9 million, down 2.3% from $1,349.0 million in Q2 fiscal 2024[106]. - Professional segment net sales for Q2 fiscal 2025 were $1,014.1 million, an increase of 0.8% compared to $1,005.6 million in Q2 fiscal 2024[107]. - Residential segment net sales for Q2 fiscal 2025 were $297.4 million, a decrease of 11.4% compared to $335.6 million in Q2 fiscal 2024[108]. - Net earnings for Q2 fiscal 2025 were $136.8 million, or $1.37 per diluted share, compared to $144.8 million, or $1.38 per diluted share, in Q2 fiscal 2024[109]. - Adjusted net earnings for Q2 fiscal 2025 were $141.8 million, or $1.42 per diluted share, compared to $147.3 million, or $1.40 per diluted share, in Q2 fiscal 2024[110]. - Total net sales for the first six months of fiscal 2025 decreased by 1.6% to $2,312.9 million compared to $2,350.9 million in the same period of fiscal 2024[125]. - Adjusted net earnings for the six months ended May 2, 2025, were $207.7 million, compared to $213.8 million for the same period in 2024[151]. Profitability Metrics - Gross profit for Q2 fiscal 2025 was $436.7 million, down 3.6% from $453.0 million in Q2 fiscal 2024, with a gross margin of 33.1%[118]. - Professional segment earnings for Q2 fiscal 2025 increased by 6.0% to $202.1 million, with a margin increase to 19.9% from 19.0% in Q2 fiscal 2024[127]. - Residential segment earnings for Q2 fiscal 2025 decreased by 55.4% to $16.1 million, with a margin decrease to 5.4% from 10.8% in Q2 fiscal 2024[129]. - The total gross profit for the six months ended May 2, 2025, was $772.3 million, a decrease from $797.5 million for the same period in 2024[151]. Expenses and Cost Management - SG&A expense decreased by $3.5 million, or 1.3%, for Q2 fiscal 2025 compared to the same period in fiscal 2024[120]. - The AMP initiative has delivered cumulative cost savings of $30.0 million and anticipated annualized cost savings of $70.5 million as of Q2 fiscal 2025[105]. - The company employs productivity initiatives to mitigate unfavorable impacts from commodity cost changes, including collaborating with suppliers and utilizing Lean methods[163]. - The company may increase product prices to offset changes in commodity costs if necessary[163]. Cash Flow and Shareholder Returns - Cash returned to shareholders during the first six months of fiscal 2025 totaled $276.3 million through dividends and stock repurchases[111]. - Free cash flow for the six months ended May 2, 2025, was $84.7 million, with a free cash flow conversion percentage of 44.7%, down from 45.6% in the same period in 2024[152]. - Cash dividend increased by 5.6% to $0.38 per share for Q2 fiscal 2025 compared to $0.36 per share in Q2 fiscal 2024[140]. Liquidity and Debt - As of May 2, 2025, available liquidity was $899.4 million, consisting of cash and cash equivalents of $176.5 million and $722.9 million under the revolving credit facility[136]. - The company has a gross fixed-rate long-term debt of $524.3 million and gross variable rate debt of $400.0 million under term loan credit agreements[160]. - The company has outstanding variable rate revolving credit facility of $175.0 million[160]. Risk Factors - The company is exposed to foreign currency exchange rate risk, particularly with the Euro, Australian dollar, and Mexican peso, which could impact earnings and cash flows[156]. - The company is exposed to commodity cost changes, particularly in steel, aluminum, petroleum, and natural gas-based resins[162]. - Any changes in foreign currency exchange rates will be reflected as a foreign currency translation adjustment, impacting accumulated other comprehensive loss but not net earnings[159]. - The company does not use interest rate swaps to mitigate interest rate fluctuations and has no earnings exposure from fixed-rate long-term debt obligations[160].