This lawn mower maker's stock tumbles as customers showed 'increased caution'

By Tomi Kilgore

Stock heads for 3-month low and biggest one-day selloff in a year after an earnings miss, lowered outlook

Shares of Toro Co. were getting cut down Thursday, after the lawn mower maker reported fiscal third-quarter earnings that missed expectations and lowered its full-year outlook, as demand from homeowners and dealers slowed as the summer progressed.

And while Toro Chief Executive Richard Olson said demand drivers in its golf businesses remain "compelling," with no signs of slowing in golf rounds played, he expects a "heightened level of macro uncertainty will continue to drive near-term caution" from customers for lawn care products.

The stock (TTC) took a 10.8% dive toward a three-month low in morning trading. That put it on track to suffer its biggest one-day selloff since it tumbled 12.7% on Sept. 7, 2023.

Shares of Deere & Co. (DE), which also makes lawn care equipment, seemed to fall in sympathy, as they dropped 1.5% to pull back from a 3 1/2-month high. (Read more about Deere's latest quarterly results.)

For the quarter to Aug. 2, Toro said it swung to net income of $119.3 million, or $1.14 a share, from a loss of $15 million, or 14 cents a share, in the same period a year ago.

Excluding nonrecurring items, adjusted earnings per share of $1.18 missed the FactSet consensus of $1.23.

Sales grew 6.9% to $1.16 billion, but was below the FactSet consensus of $1.26 billion.

"[W]e saw increased caution from homeowners and lawn care dealers as summer progressed due to macro factors, which resulted in lower-than-expected shipments of residential and professional lawn care products to our dealer channel," CEO Olson said.

Sales for the company's professional segment fell 1.7%, to $880.9 million from $896.3 million, while the FactSet consensus called for an increase to $980.8 million.

The sales decline was a result of lower shipments of snow and ice management products, lawn care equipment and compact utility loaders, which offset higher shipments of golf and grounds products and underground construction equipment.

For the residential business, sales jumped 52.6% to $267.5 million, to top the FactSet consensus of $258.9 million.

Looking ahead, the company cut its full-year guidance range for adjusted EPS to $4.15 to $4.20 from $4.25 to $4.35.

The stock has dropped 15.4% year to date, while Deere's stock has slipped 3.5% and the S&P 500 index has gained 15.8%.

-Tomi Kilgore

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09-05-24 1019ET

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