Toro fourth quarter results hit by tariffs, inflation
Higher costs associated with tariffs and inflation contributed to lower than expected fourth quarter earnings for the Toro Co.
Toro raised prices on some of its products in the quarter, which ended Oct. 31, but it wasn’t enough to offset the costs.
Toro’s fourth quarter is usually their smallest and despite the earnings miss the Bloomington-based company delivered record sales and earnings for the fiscal year-ended Oct. 31.
“We are pleased to deliver another record year with solid revenue growth led by the professional segment and a strong rebound by our residential business in the second half of the year, driven by an exciting lineup of new products and innovative technologies,” said Richard Olson, Toro’s chairman and chief executive, in a statement.
The landscaping, maintenance and irrigation equipment company earned $39 million, or 36 cents per share, up over 15 percent from the same period a year ago. But adjusted earnings were 32 cents per share, below consensus estimates from analysts of 34 cents per share.
Revenue in the quarter was $539.3 million, up 10.4 percent from the same period a year ago and better than the $516.6 million analysts were expecting.
For the year, Toro earned $271.9 million, or $2.50 per share, on sales of $2.6 billion. In the previous fiscal year, Toro earned $267.7 million, or $2.41 per share.
Toro officials told analysts on the earnings call Thursday that because the company primarily assembles components instead of making base parts, the effects of the tariffs imposed by President Donald Trump’s administration were in increased costs and depressed margins.
In the fourth quarter gross profit was 33.2 percent, down from 37.7 percent in the same quarter last year and gross margin as a percentage of sales for the year was 35.9 percent, compared to 36.8 percent.
Olson told analysts they’d address the gross margin declines in 2019. “We’ve taken measures to offset these headwinds through sourcing strategies, productivity initiatives, strategic capital investments and price adjustments across the businesses.” Olson said.
Sales of landscape contractor equipment helped the professional segment deliver strong results in the fourth quarter and for the year. Professional segment sales rose 11.1 percent in the fourth quarter and 7.5 percent for the year.
Toro’s residential segment had a slow start to the year due to a late arrival of good spring weather but the residential segment improved throughout the year. Sales of walk power mowers and zero-turn riding mowers helped fourth quarter sales for the residential segment grow 8.7 percent. For the year, residential sales were down 2.8 percent.
Toro is forecasting sales to increase 5 percent in fiscal 2019 and adjusted earning per share in the range of $2.90 to $2.95 per share.
In a down day in the stock market, Toro shares were trading at $57.42 per share, off 3.6 percent. Year-to-date shares are off 12.8 percent.
Patrick Kennedy • 612-673-7926