Toro Company Achieves Record Cash Flow Amid Mixed Earnings Call

Toro Company ((TTC)) has held its Q4 earnings call. Read on for the main highlights of the call.

The Toro Company’s latest earnings call struck an overall positive tone despite some challenges. Highlights included record achievements in free cash flow, exceeding earnings expectations, and strategic initiatives aimed at strengthening the company’s position. However, challenges in the residential segment and declining net sales were noted alongside tariff impacts, reflecting a mixed but largely optimistic outlook.

Exceeding Earnings Expectations

The Toro Company exceeded market expectations by delivering strong fourth-quarter sales and adjusted earnings per share (EPS). With an adjusted diluted EPS of $0.91 for the quarter, the company achieved year-over-year improvement across both segments, signaling resilience and operational efficacy.

Record Free Cash Flow

A standout performance was The Toro Company’s record free cash flow of $578 million, with an impressive conversion rate of 146%. This achievement was attributed to effective improvements in working capital, underscoring the company’s focus on operational efficiencies.

Professional Segment Growth

The professional segment proved to be a robust growth driver for the company, with its earnings margin rising to 19.2% in the fourth quarter. Contributions from the underground construction business and strength in snow and ice management were key factors. Full-year professional segment earnings reached $702.5 million with a margin of 19.4%, compared to 18% in fiscal 2024.

Successful AMP Program

The AMP program showed strong results, with the savings target increased to $125 million by 2026—up from the original target of $100 million. Actions such as facility closures and workforce reductions are central to achieving these enhanced savings.

Strategic Acquisition

The acquisition of Tornado Infrastructure Equipment was completed, representing a significant strategic milestone. This move expands The Toro Company’s geographic footprint and diversifies its product portfolio, particularly in vacuum excavation and industrial equipment.

Decline in Residential Segment Sales

The residential segment faced challenges during the quarter, with fourth-quarter net sales down 5.1% year-over-year. Full-year sales declined by 14%, reflecting weaker demand and increased competition in this segment.

Decreased Overall Net Sales

Consolidated net sales saw a modest decrease of 0.9% in the fourth quarter due to factors such as reduced shipments and prior-year divestitures. Though full-year sales were flat compared to 2024, it demonstrates a slight struggle to maintain growth momentum.

Impact of Tariffs

Tariffs continued to pose challenges for The Toro Company in 2026, totaling $100 million in exposure due to steel, aluminum, and China-related tariffs. This reflects external cost pressures impacting the company’s bottom line.

Forward-Looking Guidance

The Toro Company shared encouraging guidance for fiscal 2026. Net sales are expected to grow between 2% and 5%, with mid-single-digit growth anticipated in the professional segment. Residential segment sales are likely to decline slightly. Adjusted earnings per share are projected within the range of $4.35 to $4.50, alongside capital expenditures between $90 million and $100 million. The company plans to continue enhancing shareholder returns through increased dividends and share repurchases while targeting $125 million in AMP cost savings by 2026.

In summary, The Toro Company’s earnings call highlighted a strategic path forward, with strong operational achievements balanced against challenges in specific segments. Record free cash flow, robust growth in the professional segment, and proactive measures in strategic acquisition and cost savings underscore the company’s commitment to long-term success despite tariff impacts and residential segment pressures. Investors have reasons to remain optimistic about the company’s trajectory moving forward.