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TTC
Earnings call · Jul 2026 (Q3 FY26)

TORO Q3 FY26 earnings call TTC

Sep 3, 2026 Source

Executive summary

The Toro Company Q3 FY26 — Strong Sales Momentum and Raised Full-Year Guidance

The Toro Company delivered a strong third quarter, marked by broad-based sales momentum across both professional and residential segments, fueled by successful new product introductions and healthy end markets. The company's AMP productivity program continued to drive significant margin expansion and robust free cash flow, enabling a raise in full-year adjusted EPS guidance. Leadership emphasized sustained demand and operational excellence as key drivers for continued profitable growth, with a focus on innovation and strategic investments, particularly in underground construction.

Highlights

5

  • Net sales increased 8.4% to $1.23 billion, with both professional and residential segments growing over 8%.

  • Adjusted EPS grew to $1.33, driven by operational performance and share repurchases.

  • Adjusted operating margin expanded by 30 basis points to 13.9%.

  • Generated $425 million in free cash flow year-to-date, with a conversion rate of 128%.

  • Raised full-year adjusted EPS guidance to $4.60-$4.65, reflecting strong Q3 outperformance and improved Q4 outlook.

Concerns

3

  • Professional segment adjusted operating margin decreased by 40 basis points year-over-year due to product mix and higher manufacturing costs.

  • Adjusted tax rate was 22.4%, higher than expected due to geographic mix of earnings, impacting EPS by $0.08.

  • Full-year IEEPA refunds guidance reduced to $7 million from $12 million, as $5 million was reclassified outside Phase 2 with uncertain timing.

Guidance & targets

CategoryTargetConfidence
Full-year Net Sales Growth
6.3% to 6.6%
high materiality
High
Full-year Adjusted EPS
$4.60 to $4.65
high materiality
High
Professional Segment Net Sales Growth
mid-single digits
medium materiality
Medium
Residential Segment Net Sales Growth
approximately flat
medium materiality
Medium
Implied Q4 Net Sales Growth
3.9% and 5.1%
medium materiality
High
Implied Q4 Adjusted EPS
$0.93 and $0.98
medium materiality
High
Full-year IEEPA Refunds
$7 million
low materiality
Medium
Residential Segment Operating Margin
double-digit profitability
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Professional
Growth driven by landscape contractor sales (double digits), underground and specialty construction (mid-single digits). Golf shipments down modestly year-over-year. Margin down 40 bps due to product mix and higher manufacturing costs, partially offset by pricing, productivity, and volume leverage.
Organic growth: 6.1%
—8.8%—20.9%
Residential
Growth supported by partnership with Lowe's. Margin improved 400 bps year-over-year due to productivity, pricing, volume leverage, and favorable comparison to prior year inventory valuation adjustment. Higher material and manufacturing costs partially offset benefits.
—8.6%—5.9%
Underground and Specialty Construction
Continued strong performance, with increased market adoption for industrial and utility pipe relining solutions.
HammerHead Bluelight growth year-to-date: over 30%
—mid-single digits——
Landscape Contractor
Strong demand driven by redesigned Exmark Radius Zero Turn Mower, GrandStand MULTI FORCE, and Ventrac business. Successful Q3 load-in for BOSS snow and ice management products.
—double digits——
Golf
Shipments down modestly year-over-year against a strong prior year comparison. Performing in line with expectations after two years of exceptional double-digit growth. Underlying drivers remain strong.
—modestly down——

Product announcements

ProductTypeDetails
Exmark Radius Zero Turn Mowerupdate
GrandStand MULTI FORCE product lineupdate
Ventrac fence post mowerlaunch
BOSS Liquid de-icing technologies and Snow Raiderlaunch
HammerHead Bluelightupdate
GeoLink Autonomous Fairway Mowerlaunch
Reelmaster 5010-Hlaunch
Electric Greens Rollerlaunch

Deals & partnerships

Tornado Acquisition of a key tool provider for drill sites and soft excavation.

Strengthened and diversified portfolio. Accounts receivable up slightly as a result of the acquisition.

Capital programs

AMP Initiative nearing completion $125 million in run rate savings
Spent to date: exceed $125 million
Start: 2024

Benefit:durable earnings and margin improvements; mitigate tariff-related impacts

Focuses on supply-based transformation, design to value engineering, route-to-market optimization, and operational efficiencies. Will conclude in fiscal 2026, but commitment to continuous improvement will not.

Ditch Witch Capacity Expansion underway

Benefit:unleash unlock more capacity within our facilities

Largest investment currently in our plants, taking place to support the Ditch Witch business.

Risks & headwinds

Product mix and higher manufacturing costs Q3 FY26

40 basis points decrease in Professional segment adjusted operating margin

Mitigation:Partially offset by pricing, productivity improvements, and volume leverage.

Higher adjusted tax rate Q3 FY26

22.4% in Q3 FY26, $0.08 impact on adjusted EPS

Mitigation:Due to geographic mix of earnings, no specific mitigation mentioned for Q3, but implies it's a factor in future planning.

Reduced IEEPA refunds Q4 FY26

$5 million less than previously expected for FY26, reclassified outside Phase 2

Mitigation:Timing of refund is uncertain; if available in the future, will be included in guidance.

Unfavorable winter weather patterns Q4 FY26

Residential net sales expected to be approximately flat for FY26 as company laps strong prior year snow-related demand.

Mitigation:Closely monitoring winter weather patterns and will react quickly as the season develops; prepared to respond to extreme snow events or less snowfall.

Canadian retaliatory tariffs Q4 FY26 and potentially next year

Minimal impact to business in near term

Mitigation:Factored into Q4 guidance; working with channel partners to manage product flow; monitoring future discussions.

What to watch in Q4 FY26

Residential Segment Operating Margin

next year
Current 5.9% in Q3 FY26
Target double-digit profitability

Why it matters

Achievement of this target would signify a successful turnaround and significant margin expansion in a key segment.

We're expecting our residential business to return to double-digit profitability as we've been signaling for a while. We're on track to do that.

Q&A highlights

Inquired about current margin contribution, future upside, and the priority of underground construction in capital allocation, including potential inorganic growth.

Management expressed excitement about the underground business's future growth runway, driven by market demand (data centers, utilities, broadband) and internal profitability improvements. They highlighted significant plant investments and a high priority for inorganic growth in this segment.

“It is a high priority for us, and it cuts across different investment categories or the largest investment currently in our plants is taking place to unleash unlock more capacity within our facilities for the Ditch Witch business, and it is a high priority from a nonorganic perspective as well.”

asked by David S. MacGregor · answered by Richard Olson

2 min read 7 chapters

Detailed narrative

Strong Q3 Performance and Sales Momentum

The Toro Company reported robust third-quarter results with net sales increasing 8.4% to $1.23 billion, driven by strong demand across both professional and residential segments, which each grew over 8%. This momentum, fueled by successful new product launches and healthy end markets, contributed to an adjusted EPS of $1.33 and a 30 basis point expansion in adjusted operating margin to 13.9%.

Impact of AMP Program and Margin Expansion

The AMP initiative, launched in 2024, is on track to exceed its target of $125 million in run-rate savings by year-end fiscal 2026. This program has been instrumental in mitigating tariff and inflationary impacts, driving durable earnings and margin improvements. Management indicated that the 'muscle gained' from AMP will continue to enhance efficiency and profitability beyond its formal conclusion, contributing to future margin expansion.

Underground Construction Growth and Strategic Focus

The underground construction business demonstrated strong performance, growing mid-single digits in Q3, with year-to-date growth of over 30% for HammerHead Bluelight solutions. This segment is a high priority for capital allocation, including significant plant investments to unlock capacity and a focus on inorganic growth opportunities, driven by strong market demand from data centers, utility work, and broadband expansion.

Residential Segment Turnaround

The residential segment achieved an 8.6% increase in net sales and a significant 400 basis point improvement in adjusted operating margin to 5.9%. This progress, attributed to productivity improvements, pricing, and volume leverage, keeps the company on track to achieve its goal of sustainable double-digit operating margins in this segment.

Innovation in Golf and Autonomous Technology

The Golf business continues to perform in line with expectations, supported by strong underlying drivers and significant innovation. Toro showcased autonomous solutions like the Turf Pro 500, Range Pro 100, and GeoLink Autonomous Fairway Mower, demonstrating capabilities in optimizing labor resources. New product adoption, such as the electric greens roller, which is sold out for 2026, further highlights customer appreciation for advanced technology.

Robust Free Cash Flow and Capital Returns

The company generated $425 million in free cash flow year-to-date, achieving a conversion rate of 128%, driven by working capital improvements including a $153 million reduction in inventory. This strong cash generation enabled the execution of $358 million in share repurchases, underscoring disciplined capital deployment.

Leadership Transition and Future Outlook

Rick Olson, Chairman and CEO, will transition leadership to Edric Funk, President and COO, who is poised to continue the company's growth trajectory. Management expressed confidence in delivering on the updated full-year guidance, citing healthy end markets, well-positioned inventory levels, and encouraging demand trends across the business. The company anticipates strong momentum into FY27, with continued market strength and new product introductions.

AI-generated summary of the company's earnings call. Not investment advice.