Business Context and Reporting Period
Company: The Toro Company (TTC)
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Quarter and six months ended May 1, 2026
Business Overview: Toro designs, manufactures, and sells professional turf maintenance equipment, irrigation systems, landscaping equipment, and residential yard products. Operations are organized into two reportable segments: Professional and Residential.
Key Financial Metrics
| Metric | Q2 2026 | Q2 2025 | 6 Months 2026 | 6 Months 2025 |
|---|---|---|---|---|
| Net Sales ($ millions) | $1,424.7 | $1,317.9 | $2,461.0 | $2,312.9 |
| Gross Profit ($ millions) | $482.7 | $436.7 | $819.2 | $772.3 |
| Gross Margin (%) | 33.9% | 33.1% | 33.3% | 33.4% |
| Operating Earnings ($ millions) | $195.0 | $174.8 | $282.1 | $252.6 |
| Net Earnings ($ millions) | $145.4 | $136.8 | $213.3 | $189.6 |
| Diluted EPS ($) | $1.50 | $1.37 | $2.18 | $1.88 |
| Operating Cash Flow ($ millions) | N/A | N/A | $293.5 | $123.1 |
| Free Cash Flow ($ millions) | N/A | N/A | $265.5 | $84.7 |
| Total Debt ($ millions) | $1,016.8 | $1,097.1 | $1,016.8 | $1,097.1 |
| Cash & Equivalents ($ millions) | $180.4 | $176.5 | $180.4 | $176.5 |
Material Changes vs. Prior Period
- Revenue Growth: Consolidated net sales increased 8.1% in Q2 and 6.4% year-to-date (YTD), driven by net price realization, higher shipments in the Professional segment, and the acquisition of Tornado Infrastructure Equipment.
- Profitability: Net earnings rose 6.3% in Q2 and 12.5% YTD. Operating earnings increased 11.6% in Q2 and 11.7% YTD.
- Segment Performance:
- Professional: Sales up 9.1% (Q2) and 8.3% (YTD); EBIT up 11.0% (Q2) and 9.9% (YTD). Growth driven by the Tornado acquisition and higher shipments of underground construction equipment and zero-turn mowers.
- Residential: Sales up 4.4% (Q2) but flat YTD (-0.4%). EBIT surged 88.2% in Q2 and 30.6% YTD, aided by price realization and productivity improvements.
- Acquisition Impact: The $210.3 million acquisition of Tornado Infrastructure Equipment (closed Dec 2025) contributed $29.7 million in sales for Q2 and $48.7 million YTD. It added $138.1 million in goodwill and $63.8 million in intangible assets.
- Working Capital: Inventories decreased 17.5% ($196.4 million) compared to the prior year, reflecting strong early spring demand. Accounts receivable decreased 4.5%.
Guidance, Outlook, and Risks
- AMP Initiative: The "Amplifying Maximum Productivity" initiative is on track to achieve at least $125 million in run-rate savings by fiscal 2027. Cumulative savings reached $106.8 million as of Q2 2026.
- Tariffs: The company faces ongoing tariff headwinds. While a Supreme Court ruling invalidated certain IEEPA tariffs, the company has not recognized refunds as of May 1, 2026, though it estimates potential recovery of approximately $20 million.
- Capital Allocation: The company returned $360.9 million to shareholders in the first six months via dividends and stock repurchases. The quarterly dividend was increased 2.6% to $0.39 per share.
- Liquidity: Available liquidity stands at $983.3 million, including $180.4 million in cash and $802.9 million in revolver availability.
- Risks: Key risks include adverse economic conditions, supply chain disruptions, commodity cost inflation, foreign currency fluctuations, and the integration of recent acquisitions.
Investor Verification Checklist
- Acquisition Integration: Verify the realization of synergies and cost savings from the Tornado Infrastructure Equipment acquisition.
- Tariff Refunds: Monitor the status of the $20 million estimated IEEPA tariff refund and its impact on future margins.
- AMP Savings: Track progress toward the $125 million run-rate savings target for the AMP initiative.
- Residential Demand: Assess the sustainability of Residential segment sales given the flat YTD performance despite strong Q2 growth.
- Debt Maturities: Review the debt schedule, noting $100 million due in 2027 and $375 million due in 2029.