Outdoor equipment company Toro (NYSE: TTC) reported revenue ahead of Wall Streets expectations in Q3 CY2025, but sales were flat year on year at $1.07 billion. Its non-GAAP profit of $0.91 per share was 4.2% above analysts’ consensus estimates.

Is now the time to buy TTC? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

The Toro Company’s third quarter was met with a positive market reaction, as management cited improved execution in its Professional segment and better-than-expected results from snow and underground construction businesses. CEO Rick Olson emphasized operational excellence, noting that “sustained momentum in the underground construction business and better-than-anticipated growth in snow and ice management” helped offset lower volumes in traditional product categories. Management also highlighted successful cost savings from its Amplifying Maximum Productivity (AMP) initiative and a strong cash flow performance, reflecting the company’s ongoing focus on productivity and efficiency.

Looking forward, The Toro Company’s guidance reflects cautious optimism, with management anticipating modest revenue growth driven by continued strength in professional markets and the recent acquisition of Tornado Infrastructure Equipment. CFO Angie Drake stressed that productivity improvements, selective price increases, and disciplined capital allocation will be key to navigating persistent headwinds like tariffs and inflation. Management also remains attentive to consumer confidence and macroeconomic factors, with Drake noting, “We remain cautious about macro factors, including inflation and interest rates, that may continue to pressure consumer confidence.”

Key Insights from Management’s Remarks

Management credited strong Professional segment execution, cost savings from AMP, and selective price increases as key drivers of the quarter.

• Professional segment resilience: The Professional segment, which represents about 80% of the portfolio, maintained earnings margins above 19%, with underground construction and snow equipment offsetting declines in golf and zero-turn mowers.
• AMP cost savings momentum: The AMP program delivered $86 million in annualized run-rate savings, aided by facility closures, a 15% reduction in salaried workforce, and divestitures of non-core assets. The target was raised to $125 million in savings by 2026.
• Tornado acquisition: Management closed the acquisition of Tornado Infrastructure Equipment, expanding Toro’s product offering in vacuum excavation and industrial equipment. This move is intended to position the company for growth in infrastructure-related projects.
• Operational footprint reduction: Over 1 million square feet of operational space was eliminated, supporting cost savings and aligning production with current demand trends.
• Product innovation focus: New launches in alternative power, smart connected equipment, and autonomous solutions—such as the GeoLink fairway mower and AI-enabled irrigation software—are beginning to gain traction, especially with commercial customers facing labor constraints.

Drivers of Future Performance

Guidance for the upcoming year is anchored in expected growth from infrastructure demand, AMP-driven margin improvements, and continued focus on operational discipline.

• Infrastructure and pro-market demand: Management expects mid-single-digit growth in professional segment sales, underpinned by ongoing strength in underground construction, golf equipment, and new infrastructure investments. The Tornado acquisition is expected to contribute to top-line growth, although integration costs will weigh on initial profitability.
• Margin expansion through productivity: The company targets improved gross and operating margins as AMP cost savings build, but anticipates ongoing pressure from tariffs, higher material costs, and a less favorable product mix. About half of AMP savings will be reinvested in innovation and technology.
• Residential caution and macro risks: Residential sales are projected to decline, reflecting continued consumer caution and sensitivity to interest rates. Management has built conservative assumptions for this segment, highlighting uncertainty around homeowner spending and broader economic headwinds.

Catalysts in Upcoming Quarters

In the coming quarters, StockStory analysts will be watching (1) how quickly cost savings from AMP translate into sustained margin improvement, (2) the integration progress and top-line contribution of the Tornado acquisition, and (3) signs of stabilization or recovery in residential demand amid ongoing macroeconomic uncertainty. Performance of new product launches and the company’s ability to mitigate rising tariff costs will also be important indicators of execution.

The Toro Company currently trades at $80.85, up from $72.65 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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