TORO (TTC) Q2 FY26 earnings call: guidance and Q&A

How did the return to leaner channel inventories and seasonal stocking targets contribute to Q2 unit growth, and were there any offsetting factors like extended lead times?

Management stated that the quarter saw a return to a more normal situation with good supply meeting demand, which was even beyond expectations. Any changes in flow from manufacturing locations were part of normal distribution, and field inventories are now in good shape.

“I think the best way to describe it is a pretty normal quarter from a residential standpoint, particularly.”

asked by David S. MacGregor · answered by Richard Olson

Can you discuss Ditch Witch shipment growth versus orders (book-to-bill), and the opportunity to grow parts and service penetration to impact Pro segment margins?

The Ditch Witch business saw low double-digit growth driven by sustained demand and doubled production capacity. Parts and service is a focus area with opportunities to accelerate growth and contribute to profitability, supported by innovation investments.

“Parts and service goes with it. And one of the things that Edric and team has been focused on is really making sure that we get all of our parts as a percentage of total sales. So we see even more opportunity to accelerate that.”

asked by David S. MacGregor · answered by Richard Olson

Can you frame the annualized impact from tariffs, given the $120 million gross assumption for FY26, and how the $20 million refund will be accounted for?

The gross tariff estimate for FY26 is $120 million, offset by an anticipated $20 million refund, resulting in a negligible net impact for the current fiscal year. The $120 million is expected to be the run-rate going forward, assuming steady state regulations. The $20 million refund will be included in adjusted EPS, with approximately 70% allocated to the Pro segment and the remainder to Residential.

“The $20 million increase is offset by the $20 million refund. So grand total, relatively unchanged.”

asked by Bobby Schultz · answered by Edric Funk

What are you seeing in sell-through for landscape contractor and residential, and was there any impact from dry spring weather in the Southeast?

Sell-through was very strong, leading to healthy field inventories, though residential is slightly below desired levels. While drought in some areas could impact residential/contractor, it also means better weather for golf, with rounds played up 5% YoY. Overall, no significant concerns from weather.

“While there is potential for a drag in one area, it's probably driving additional opportunity for our customers in another area to invest.”

asked by Bobby Schultz · answered by Edric Funk

What factors contributed to the positive international performance in Q2, especially after a sharp decline last quarter?

The positive international performance was primarily driven by the impact of the Tornado acquisition, which has performed at or ahead of plan, particularly in Canada. Softness, especially in European residential, continues to be a reducing factor.

“The factor that was on the positive side is the impact of Tornado, which has been at or ahead of our plan for the year.”

asked by Sam Darkatsh · answered by Richard Olson

With pandemic-era sales reaching replacement age by 2027, is there pent-up demand for residential products that could create tailwinds?

Products purchased in 2020 are reaching replacement age, which should at least remove a headwind. The residential market is returning to a more normalized, longer-term growth rate, with opportunities for growth as the market settles and profitability improves.

“So we're kind of back on the rails of that growth rate. So more normalized and then seeing opportunities also for growth as the market kind of shakes out as well, potentially some opportunities.”

asked by Michael Shlisky · answered by Richard Olson

Can you provide color on the company's M&A strategy, particularly which areas (e.g., construction, turf/golf) are most exciting for future growth?

The M&A strategy focuses on disciplined acquisitions that fit existing areas of strength, like Tornado in construction, which extends current product lines. The company prioritizes opportunities that expand markets, have strong runways, and leverage technology across platforms, with a general focus on the professional side of the business.

“We focus on areas that we know and that have opportunities to expand markets and businesses that we believe have a strong runway and profit picture into the future.”

asked by Ted Jackson · answered by Richard Olson

How is the company sustaining record profitability despite $120 million in tariffs, and what are the key offsets?

The record profitability is due to the AMP productivity program, which was initiated before the full impact of tariffs and inflation. This program, along with footprint reduction and portfolio pruning, has allowed the company to offset tariffs and improve broader productivity, leading to improved margins and strong cash flow conversion.

“The timing of AMP could not have been better. It has just been an incredible benefit to us to have the productivity machine already in motion by the time when these costs and additional tariffs came along.”

asked by Eric Bosshard · answered by Richard Olson