Toro Co.’s (TTC) earnings increased 17% to $1.32 per share in the second quarter of 2013 from $1.13 cents a share in the year-ago quarter. The results were way ahead of the Zacks Consensus Estimate of $1.19.
Sales increased 1.9% year over year to $704 million in the quarter, beating the Zacks Consensus Estimate of $700 million. The year-over-year growth was led by improved market conditions combined with new products and solid execution, fueled shipment growth, offset by adverse weather condition resulting in the delay of residential shipments.
Cost of sales declined to $452 million in the reported quarter compared with $456 million in the year-ago quarter. Gross profit improved 7% to $252 million from the prior-year quarter. Gross margin expanded 180 basis points (bps) year over year to 35.8% in the quarter, due to segment mix along with productivity gains and selective price increases.
Selling, general, and administrative expense increased 4.5% to $134.8 million in the quarter, driven by higher warehousing expense, incremental costs from acquisitions, increased engineering spending and higher health insurance costs. Operating profit improved 10% to $117 million in the quarter from $106.5 million in the prior-year quarter. Consequently, operating margin expanded 130 bps year over year to 16.7%.
Professional: Net sales at the segment increased 8.9% to $496 million in the quarter, primarily due to increased shipments of landscape contractor equipment and incremental sales from the Stone acquisition. The growth was also driven by a rise in sales of rental and construction equipment and hike in global golf equipment sales based on improved budgets and customer demand. Professional segment posted earnings of $112.3 million, up 13.8% from the prior year period.
Residential: The segment reported sales of $201 million in the reported quarter, dropped 13% year over year, affected by unfavorable weather condition which had a negative impact on the sales of walk power mowers and riding products. Consequently, residential segment recorded earnings of $24.7 million for the second quarter, down 13.5% from the prior year quarter.
Cash and cash equivalents were $80 million as of May 3, 2013 compared with $82.5 million as of May 4, 2012. Cash flow from operating activities was $36.6 million in the reported quarter compared with $89.5 million in the prior-year quarter.
Long-term debt amounted to $223.5 million as of May 3, 2013, compared with $223.7 million as of May 4, 2012. The debt-to-capitalization ratio contracted to 37.4% as of May 3, 2013 from 42% as of May 4, 2012.
Toro revised its revenue growth expectation for fiscal 2013 in the range of 3% to 4% from the previous range of 4% to 5%. However, the company is maintaining its earnings outlook in the band of $2.40 to $2.45 per share, based on the strength of productivity gains and favorable commodity trends, partly offset by anticipated pressures from mix and manufacturing utilization.
Bloomington, Minn-based Toro Co. is a worldwide provider of turf and landscape maintenance equipment, and irrigation solutions to help customers care for golf courses, sports fields, public green spaces, commercial and residential properties, and agricultural fields. The company operates through its two segments - Professional and Residential.
Toro Co. currently retains a short-term Zacks Rank #3 (Hold).
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