Business Context and Reporting Period
Company: The Toro Company (TTC)
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Three and nine months ended July 31, 2026 (Fiscal Q3 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 (in millions, except per share) | Q3 2026 | Q3 2025 | 9M 2026 | 9M 2025 |
|---|---|---|---|---|
| Net Sales | $1,225.8 | $1,131.3 | $3,686.8 | $3,444.2 |
| Gross Profit | $418.1 | $381.8 | $1,237.3 | $1,154.1 |
| Gross Margin | 34.1% | 33.7% | 33.6% | 33.5% |
| Operating Earnings | $115.2 | $64.8 | $397.3 | $317.4 |
| Net Earnings | $77.0 | $53.5 | $290.3 | $243.1 |
| Diluted EPS | $0.81 | $0.54 | $2.99 | $2.42 |
| Operating Cash Flow (9M) | $476.2 | $348.9 | ||
| Free Cash Flow (9M) | ||||
| Total Debt | $962.0 | $1,032.2 | $962.0 | $1,032.2 |
| Cash & Equivalents | $175.3 | $201.0 | $175.3 | $201.0 |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 8.4% in Q3 and 7.0% year-to-date (YTD), driven by volume growth, net price realization, and the acquisition of Tornado Infrastructure Equipment.
- Profitability: Net earnings rose 44% in Q3 and 19% YTD. Operating earnings increased 78% in Q3, largely due to a significant non-cash impairment charge of $81.1 million in the prior year (Spartan trade name) that did not recur.
- Impairment Charges: The company recorded $43.1 million in non-cash impairment charges in Q3 2026 related to the planned closure of the Monterrey manufacturing facility and the exit of a residential mower platform. This compares to $81.1 million in Q3 2025.
- Segment Performance:
- Professional: Sales up 8.8% (Q3) and 8.5% (YTD); profit up 6.7% (Q3) and 8.7% (YTD).
- Residential: Sales up 8.6% (Q3) and 2.0% (YTD); profit up 235.1% (Q3) and 51.1% (YTD), aided by productivity improvements and prior year inventory adjustments.
- Acquisition Impact: The December 2025 acquisition of Tornado Infrastructure Equipment contributed $31.5 million in sales and $2.1 million in profit for Q3 2026.
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 $123.4 million as of Q3 2026.
- Tariffs: The company continues to incur costs related to tariffs but is mitigating impacts through price increases and strategic sourcing. Approximately $8 million in IEEPA tariff refunds have been recorded, with an estimated total recovery of $20 million pending.
- Liquidity: Available liquidity stands at $1,033.2 million, including $175.3 million in cash and $857.9 million in revolver availability. Management expects sufficient capital for operations, dividends, and repurchases for the next 12 months.
- Capital Allocation: The company increased its quarterly dividend to $0.39 per share (2.6% increase) and repurchased 3.9 million shares ($358.1 million) in the first nine months of fiscal 2026.
- Risks: Key risks include adverse economic conditions, inflation, supply chain disruptions, foreign currency fluctuations, and the successful integration of recent acquisitions.
Investor Verification Checklist
- Impairment Details: Verify the specific asset write-downs associated with the Monterrey facility closure and residential mower platform exit ($43.1 million total).
- Tariff Refunds: Monitor the status of the $20 million estimated IEEPA tariff refund and the timeline for receipt.
- AMP Savings Realization: Track the progress of the AMP initiative against the $125 million run-rate savings target for fiscal 2027.
- Debt Maturities: Review the debt schedule, noting $100 million due in 2027 and $320 million due in 2029.
- Inventory Levels: Assess the $153.5 million decrease in inventory year-over-year and its impact on future working capital needs.