The Toro Company: A Baby Bull Market Is Gaining Traction

Core Viewpoint - The Toro Company is showing signs of a potential market recovery, with a bullish outlook for 2026 despite challenges faced in 2025 [2][5]. Group 1: Market Performance - The Toro Company's stock chart indicates that its bear market is over, with a baby bull market forming and gaining traction [2]. - There is clear support at long-term lows, suggesting a strengthening market commitment and an imminent breakout [2][4]. - The stock is attempting to establish a base after a difficult period, with indications that selling pressure is easing [3]. Group 2: Financial Performance - In 2025, the company experienced revenue contraction due to weakness in the consumer segment, but strength in the Pro segment and cost-saving efforts helped offset this [5]. - The AMP strategy has resulted in a 220 basis-point improvement in adjusted gross margin, with adjusted EPS exceeding consensus by over 450 basis points [5]. - Free cash flow reached a record high, and cost savings are expected to continue into the next fiscal year [5]. Group 3: Future Guidance - The Toro Company anticipates a modest single-digit revenue gain in 2026, with an increased earnings forecast that exceeds prior levels [6]. - The new guidance includes a 25% increase to the AMP savings target, expected to be realized by the end of fiscal year 2026 [6]. - The outlook for capital returns has improved, indicating a positive trajectory for investors [6]. Group 4: Capital Returns - The company's dividend yield is approximately 2% as of the end of 2025, deemed safe at 35% of the earnings forecast, with a history of annual distribution increases over 22 years [7]. - The cash flow and balance sheet support share buybacks, which reduced the share count by 4.4% in FY2025 and are expected to continue in FY2026 [7].