The Toro Company ( TTC ) shares fell after the company posted fiscal third-quarter net sales of $1.13 billion, a 2% decline from a year earlier and short of the $1.16 billion analyst estimate.

Net earnings fell to $53.5 million from $119.3 million, with diluted earnings per share of 54 cents, including a noncash impairment charge of 62 cents per share, or $81 million pretax.

Adjusted net earnings were $122.5 million compared with $123.7 million a year ago, while adjusted diluted earnings per share rose 5% to $1.24, beating the $1.22 estimate.

Professional segment sales increased 5.7% to $930.8 million, driven by higher shipments of underground construction and golf and grounds equipment, and net price realization. Segment earnings rose to $198.5 million from $165.7 million, with margin expanding to 21.3% from 18.8%.

Residential segment sales fell 27.9% to $192.8 million, reflecting lower homeowner demand. Earnings dropped to $3.7 million from $32.6 million, with margin declining to 1.9% from 12.2%.

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Gross margin was 33.7% compared with 34.8% last year, while adjusted gross margin was 34.4%, down from 35.4%. Operating earnings were $64.8 million versus $148.1 million a year ago, and adjusted operating earnings were $154.0 million versus $159.0 million.

Cash provided by operating activities for the first nine months was $348.9 million, up from $329.8 million. Free cash flow rose to $291.9 million from $270.5 million, with a 90% free cash flow conversion rate.

At quarter end, cash and equivalents stood at $201.0 million, and total debt was $1.03 billion, including a $20.0 million current portion.

“We delivered third-quarter adjusted earnings that exceeded our expectations, with our Professional segment achieving 6 percent growth and 250 basis points of margin expansion,” said Richard M. Olson, chairman and chief executive officer.

“Strong momentum in underground construction and golf and grounds, coupled with savings from our AMP productivity program, enabled us to exceed adjusted earnings expectations despite headwinds in our Residential segment,” he added. “Looking ahead, while we are taking a prudent approach, given challenges in Residential, our continued innovation leadership and focus on productivity, position us to further improve profitability and shareholder returns as markets recover.”

Outlook:

For fiscal 2025, Toro narrowed its guidance. Management now expects adjusted diluted earnings per share of about $4.15, versus prior guidance of $4.15 to $4.30 and below the $4.26 analyst estimate.

Net sales are expected to be $4.446 billion, compared with the prior $4.446 billion to $4.584 billion range and below the $4.532 billion estimate.

The outlook reflects tariff impacts, softer residential demand, strong demand in underground construction and golf and grounds, and weather in line with historical averages.

“We are taking decisive actions to strengthen our resilience and accelerate performance. Our AMP program, delivering $75 million in annualized savings today and targeting at least $100 million by 2027, combined with proactive tariff mitigation and strategic capacity alignment, positions us to deliver earnings growth independent of revenue expansion,” concluded Olson.

Price Action: TTC shares are trading lower by 2.56% at $78.54 as of Thursday at last check.

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