The Toro Company (TTC) Stock: Q3 Sales Slip 2% But Underground Construction and Golf Drive Profits

TLDR

TTC Q3 Beats Adjusted EPS; Pro Segment Shines Despite Residential Woes Toro Gains on Pro Strength, But Spartan Woes Hit Residential Hard Toro’s Q3: EPS Rises on Cost Cuts, But Residential Drags Overall Sales TTC Q3 Sees Pro Segment Surge as Residential Slumps 28% Toro Sticks to FY25 Outlook Despite Impairment and Margin Pressures

The Toro Company(TTC) shares settled at $80.08, reflecting a 0.56% decline amid a volatile trading session.

The Toro Company(TTC) 

The company reported fiscal Q3 net sales of $1.13 billion, down 2% compared to the same quarter last year. Strong underground construction and golf and grounds performance helped offset residential weaknesses.

TTC’s reported diluted EPS fell to $0.54 due to an $81 million non-cash impairment charge tied to the Spartan business. Adjusted diluted EPS climbed 5% year-over-year to $1.24, driven by the Professional segment’s margin gains. The AMP productivity program, currently delivering $75 million in annualized savings, played a key role in improving efficiency.

TTC confirmed that full-year fiscal 2025 guidance remains within its previously stated ranges. The company expects an adjusted EPS of approximately $4.15, which is near the lower end of guidance. Management continues to target at least $100 million in cost savings from AMP by 2027.

Professional Segment Expands Sales and Margins

The Professional segment drove Q3 growth for TTC, posting net sales of $930.8 million, up 5.7% from the prior year. Gains stemmed from higher shipments in underground construction and golf and grounds products, alongside effective price realization. These results helped TTC boost segment earnings to $198.5 million, a 19.8% year-over-year increase.

The segment’s operating margin rose to 21.3%, reflecting productivity improvements, strategic pricing, and reduced marketing spend. TTC also benefited from cost savings and sales leverage, though higher manufacturing costs posed a partial offset. Divestitures from the previous year had a minor impact on total sales but did not disrupt overall performance.

Underground construction remained a standout area, delivering reliable volume and demand during the quarter. Golf and grounds products continued to see stable supply and customer interest. These sub-segments played a crucial role in exceeding adjusted earnings expectations.

Residential Segment Contracts Amid Market Weakness

TTC’s Residential segment posted Q3 net sales of $192.8 million, a 27.9% drop from the same quarter in 2024. Weaker homeowner demand and reduced shipments weighed heavily on performance across all product categories. The segment’s earnings plummeted to $3.7 million, down sharply from $32.6 million a year earlier.

The operating margin for residential was narrowed to 1.9%, which was hit by higher input costs and increased sales incentives. Inventory valuation adjustments also dragged profitability lower, although cost-saving efforts offered minor relief. Market recovery for Spartan-branded products progressed slower than anticipated, prompting the impairment charge.

TTC acknowledged macroeconomic pressures and consumer caution as major volume headwinds. Despite these conditions, it aims to stabilize Residential operations with targeted promotions and supply adjustments. While residential softness persists, TTC continues to prioritize innovation and cost control.

Financial Efficiency, Guidance, and Outlook

TTC reported a third-quarter gross margin of 33.7% and an adjusted gross margin of 34.4%, both down year-over-year. The decline stemmed from lower volumes and higher material costs, partially offset by improved productivity and pricing actions. Operating earnings as a percentage of sales dropped to 5.7%, but adjusted operating earnings held steady at 13.6%.

SG&A expenses improved, falling to 20.8% of net sales from 22.0% the previous year. Interest expenses rose slightly to $15.1 million due to increased borrowing, despite lower average rates. TTC’s effective tax rate stood at 7.4% due to impairment effects, while the adjusted rate held at 17.3%.

TTC maintained guidance with fiscal 2025 net sales expected to be flat to down 3%. The adjusted EPS outlook of $4.15 accounts for tariff impacts and ongoing market pressures. TTC remains focused on productivity, resilience, and strategic execution to drive sustainable earnings growth.

 

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