) gained over 2% and closed at $62.51 after reporting an improved
third-quarter (ended Aug 1, 2014) results on Aug 21. Earnings
increased 28% year over year to a record 87 cents per share.
Earnings came ahead of the Zacks Consensus Estimate by a penny as
well as above management's guidance of 80 cents per share.
Sales grew 11% year over year to hit a record of $567.5 million,
beating the Zacks Consensus Estimate of $566 million.
Year-over-year growth was driven by strong retail demand for both
professional and residential products.
Cost of sales rose to $365 million from $332 million in the
year-ago quarter. Gross profit increased 13.5% year over year to
$202 million. Gross margin rose 70 basis points (bps) year over
year to 35.6%, due to favorable product mix and realized pricing,
offset by higher commodity costs.
Selling, general, and administrative expenses went up 8.9% year
over year to $130 million, primarily driven by the leveraging of
expenses over higher sales volumes. Operating profit increased 23%
year over year to $72 million. Operating margin expanded 120 bps
year over year to 12.7%.
The Toro Company - Earnings Surprise |
Net sales from this segment grew 12% year over year to $384
million, primarily due to increased sales of golf equipment and
irrigation products on the back of strong retail demand for
innovative products. Sales also benefited from the revisiting of
normal quarterly flow of equipment channel purchases, subject to
Tier 4 emission standards. The Professional segment posted earnings
of $74.8 million, up 4.8% from the prior-year quarter.
This segment reported sales of $175.7 million, up 13% year over
year. Growth was attributable to an increased early demand as
channel partners began to prepare for the anticipated strong
pre-season retail. Further, sales of residential zero turn mowing
products grew on continued retail demand for these mowing
platforms. The residential segment reported earnings of $18.7
million, up 24% year over year.
Toro ended the quarter with cash and cash equivalents of $178
million, as against $161 million at the end of the prior-year
quarter. Cash from operations for the nine months ended Aug 1, 2014
was $164 million, compared with $158 million in the year-ago
Long-term debt was $224 million as of Aug 1, 2014, flat compared
with $223.5 million as of Aug 2, 2013. The debt-to-capitalization
ratio contracted 170 bps to 35.3% as of Aug 1, 2014 from 37% as of
Aug 2, 2013.
For full-year fiscal 2014, Toro revised its revenue growth guidance
of 5-6% to around 6%. The company also raised its net earnings per
share guidance for the year to a range of $2.94-$2.96 from the
There will be continued growth in construction of golf courses
around the world, which bodes well for Toro. Toro successfully
closed a number of equipment packages and distributors open order
banks remain strong. Toro will also benefit from improvement in the
housing and construction sector. Development of innovative products
will also drive growth.
Moreover, the ongoing construction activity will offer
opportunities for residential and commercial irrigation and
lighting businesses. Toro anticipates its international businesses
to benefit from strong snow thrower demand in Canada and continued
However, foreign exchange volatility along with social and
political unrest, remain the headwinds.
Bloomington, MN-based Toro is a worldwide provider of turf and
landscape maintenance equipment as well as irrigation solutions for
golf courses, sports fields, public green spaces, commercial and
residential properties and agricultural fields. The company
operates through two segments: Professional and Residential.
Toro currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in same sector include Churchill Downs
), Choice Hotels International Inc. (
) and Capella Education Co. (
). All these stocks carry a Zacks Rank #2 (Buy).
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