What Do The Toro Company’s Risk Factors Tell Investors?

The Toro Company (TTC) is an American multinational provider of outdoor environment solutions. Its products include lawnmowers and snow blowers. It also makes irrigation systems.

For Fiscal Q1 2022 ended January 28, Toro reported a 6.8% year-over-year jump in revenue to $932.7 million but missed the consensus estimate of $967.4 million. It posted adjusted EPS of $0.66, which declined from $1.02 in the same quarter the previous year but beat the consensus estimate of $0.63.

In an expansion move, Toro recently acquired Arkansas-based Intimidator, the maker of the Spartan brand of mower. It said the acquisition adds a complementary product line and enhances its customer reach.

With this in mind, we used TipRanks to take a look at the risk factors for The Toro Company.

Risk Factors

According to the new TipRanks Risk Factors tool, The Toro Company’s main risk category is Finance and Corporate, with 10 of the total 39 risks identified for the stock. Production and the Ability to Sell are the next two major risk categories with 9 and 6 risks, respectively.

Toro tells investors that the Intimidator acquisition subjects it to a number of uncertainties that could adversely affect its business and financial condition. For example, it mentions that it may discover surprise liabilities associated with Intimidator, which could result in costs and expenses that cannot be recovered from the sellers or covered by insurance. Toro further explains that the integration of Intimidator’s business could prove more costly and disruptive than anticipated.

Toro ended Fiscal Q1 2022 with about $1 billion in debt. The company explains that its credit arrangements with banks come with certain terms. It says that its ability to comply with those credit terms depends on certain factors that are outside its control. Toro cautions that if it fails to comply with those terms, the banks could terminate their commitments and it could be required to repay any outstanding amounts immediately. 

Moreover, failure to comply with the credit terms could result in a downgrade of the company’s credit rating, which could limit the company’s access to financing in the future.

Finally, Toro tells investors that its success depends on its ability to improve its existing products and introduce new products that meet the needs of customers. Therefore, the company cautions that the demand for its products may decrease and adversely impact its sales if it is unable to continually improve its product portfolio.

Analysts’ Take

Robert W. Baird analyst Timothy Wojs recently maintained a Hold rating on The Toro Company stock but lowered the price target to $110 from $120. Wojs’ reduced price target still suggests 33.16% upside potential.

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