The Toro Company (NYSE: TTC), a global leader in outdoor solutions, has disclosed its financial performance for the fiscal second quarter ending May 3, 2024.
Richard M. Olson, the chairman and CEO, remarked, “We’ve delivered results in line with our projections for the second quarter, achieving record net sales. Growth in our residential segment was exceptional, attributed to robust mass channel performance, successful product launches, and improved weather conditions compared to the previous year. Additionally, our professional segment witnessed growth in underground and specialty construction, and golf and grounds businesses, with enhanced output from existing manufacturing facilities to manage heightened order backlog and enhance customer service. Notably, we’ve made significant strides in reducing dealer field inventories for lawn care equipment across both residential and professional segments, reflecting decreased shipments to the channel alongside spring retail momentum.”
Olson further outlined the company’s strategic advancements and innovative product introductions during the quarter. Among these were the latest iterations of Toro TimeCutter® and Titan® zero turn mowers, which garnered positive customer feedback, along with the introduction of the TX1000 Turbo compact utility loader featuring enhanced SmartPower® features for heightened operator efficiency. Additionally, the launch of the Ditch Witch AT120, the world’s most powerful all-terrain horizontal directional drill, catered to the escalating underground construction market.
OUTLOOK
Olson expressed confidence in Toro’s growth prospects for fiscal 2024, underpinned by strong fundamentals, market leadership, and robust relationships. Anticipated strengths include sustained demand in the professional segment’s underground construction and golf businesses, driven by substantial ongoing infrastructure investments globally and continued momentum in golf activities. Moreover, positive signs of recovery in homeowner markets alongside favorable spring weather patterns are expected to fuel growth in shipments to the residential segment mass channel.
The company reiterated its fiscal 2024 guidance, projecting low single-digit total company net sales growth and adjusted diluted EPS within the range of $4.25 to $4.35. This outlook factors in sustained demand and stable supply for businesses with elevated order backlog, along with macroeconomic factors influencing consumer and channel behavior, and historical weather patterns for the remainder of the year.
Professional Segment
In the second quarter, professional segment net sales totaled $1,005.6 million, down 5.9% from the same period last year. This decline was primarily driven by reduced shipments of zero-turn mowers, partially offset by increased shipments of underground and specialty construction equipment, and golf and grounds products. Professional segment earnings were $190.7 million, down 16.2% year-over-year, with profitability impacted by lower net sales volume and higher material and manufacturing costs, partially offset by productivity gains.
Residential Segment
Residential segment net sales for the second quarter amounted to $335.6 million, up 26.3% year-over-year, primarily attributed to increased shipments to the mass channel, partially offset by lower shipments to the dealer channel. Residential segment earnings were $36.1 million, up 59.0% year-over-year, with improved profitability driven by net sales leverage and productivity enhancements.
OPERATING RESULTS
Gross margin and adjusted gross margin for the second quarter were both 33.6%, down from 35.8% in the same prior-year period, primarily due to product mix and higher material and manufacturing costs, partially offset by productivity improvements.
SG&A expense as a percentage of net sales for the second quarter was 19.7%, compared with 19.5% in the prior-year period, primarily due to slightly higher corporate expenses, mostly offset by lower marketing costs.
Operating earnings as a percentage of net sales were 13.9% for the second quarter, compared with 16.3% in the same prior-year period. Adjusted operating earnings as a percentage of net sales for the second quarter were 14.2%, compared with 16.3% in the same prior-year period.
Interest expense increased to $16.7 million for the second quarter, up $2.0 million from the same prior-year period, primarily due to higher average outstanding borrowings and interest rates.
The reported effective tax rate for the second quarter was 19.2%, compared with 20.6% in the same prior-year period. The adjusted effective tax rate for the second quarter was 19.8% compared with 21.1% in the same prior-year period, reflecting a more favorable geographic mix of earnings.
