Toro Q2 Profit Up 11%, Results Beat View; Affirms 2014 Outlook

(RTTNews) - Turf maintenance equipment maker Toro Co. (TTC) on Thursday reported an 11 percent increase in profit for the second quarter from last year, reflecting higher sales at its professional and residential segments.

Both earnings per share and revenue for the quarter beat analysts' expectations. Looking ahead, Toro forecast earnings for the third quarter and affirmed its earnings outlook for fiscal 2014, both below analysts' estimates.

Michael Hoffman, Toro's chairman and chief executive officer said, "Although retail sales of some residential products were hampered by the late spring, we experienced strong growth in our landscape maintenance business. Contractors who benefited from the robust snow season last winter invested in more new turf equipment during the quarter, favoring our productivity-enhancing mowers."

Hoffman noted that in addition, shipments of golf equipment and irrigation products increased due to channel demand for the company's new product offerings, including the recently introduced Infinity sprinklers.

The company's professional business segment offers turf and landscape equipment products such as sports fields and grounds maintenance equipment, golf course mowing and maintenance equipment, and landscape contractor mowing equipment.

The residential business segment provides walk power mowers, riding mowers, snow throwers, replacement parts, and home solutions products.

Professional segment net sales for the quarter rose 7 percent from the year-ago period to $528.56 million, while residential segment net sales increased 5 percent to $210.38 million. However, other sales decreased 9 percent to $6.09 million.

Bloomington, Minnesota-based Toro's net earnings for the second quarter were $87.09 million or $1.51 per share, up from $78.40 million or $1.32 per share in the same quarter last year. On average, five analysts polled by Thomson Reuters expected the company to report earnings of $1.48 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter rose 6 percent to $745.03 million from $704.49 million in the prior year quarter, driven by strong demand for professional segment products. Analysts had a consensus revenue estimate of $735.55 million for the quarter.

Gross margin for the quarter declined 30 basis points from last year to 35.5 percent, primarily due to higher commodity costs and unfavorable currency exchange rates, somewhat offset by realized pricing. However, operating margin improved 90 basis points to 17.6 percent compared to the same period last year.

Selling, general and administrative expenses for the quarter edged down less than 1 percent to $133.66 million.

Looking ahead to the third quarter, Toro forecasts net earnings of about $0.82 per share. Street expects the company to earn $0.87 per share for the quarter.

For fiscal 2014, Toro maintained its outlook for net earnings of about $2.90 to $2.95 per share on revenue growth of about 5 to 6 percent. Analysts expect the company to report earnings of $2.96 per share for the year on a 5.6 percent increase in revenues to $2.16 billion.

Hoffman said, "We will keep a watchful eye on retail demand and field inventories across our businesses and make any necessary adjustments. In addition, we will benefit from increased pre-season snowthrower shipments, primarily in the fourth quarter, that are needed to replenish inventories diminished by strong customer demand last winter."

TTC is currently trading at $62.79, up $0.40 or 0.64 percent on a volume of 215,832 shares.