The Toro Co (TTC) Faces Headwinds in Q1 Fiscal 2024 Despite Solid Demand in Select Markets
Net Sales: Reported $1.00 billion, a decrease of 13% from $1.15 billion in Q1 FY23.
Net Earnings: Dropped to $64.9 million, down 39% from $106.9 million in the same period last year.
Diluted EPS: Decreased to $0.62, compared to $1.01 in Q1 FY23.
Professional Segment: Net sales fell by 14.1% primarily due to lower shipments of zero-turn mowers and snow and ice management products.
Residential Segment: Experienced a 9.3% decline in net sales, driven by lower shipments of snow products and zero-turn mowers.
Outlook: The company reaffirms its full-year fiscal 2024 guidance, expecting low-single-digit total company net sales growth and adjusted diluted EPS in the range of $4.25 to $4.35.
The Toro Co (NYSE:TTC) released its 8-K filing on March 7, 2024, detailing the financial results for the first quarter of fiscal year 2024. The company, known for its turf maintenance and landscaping equipment, faced a challenging quarter with net sales of $1.00 billion, a 13% decrease compared to $1.15 billion in the same period of fiscal 2023. The reported diluted EPS was $0.62, a significant drop from $1.01 in the prior year's first quarter.
Segment Performance and Financial Highlights
The Professional segment, which is the primary revenue generator for TTC, saw net sales decrease by 14.1% to $756.5 million. This was mainly due to lower shipments of zero-turn mowers and snow and ice management products, partially offset by higher shipments of underground and specialty construction products, and golf and grounds equipment. Professional segment earnings also fell by 21.7% to $112.8 million.
The Residential segment reported a 9.3% decrease in net sales to $240.1 million, primarily impacted by lower shipments of snow products and zero-turn mowers. Residential segment earnings saw a significant decline of 37.8% to $23.5 million, largely due to product mix.
Gross margin remained relatively stable at 34.4%, slightly down from 34.5% in the prior-year period. Selling, general and administrative expenses as a percentage of net sales increased to 25.6%, up from 22.6% in the prior-year period, driven by lower net sales volume.
Outlook and Management Commentary
Chairman and CEO Richard M. Olson commented on the results, stating,
The first quarter aligned with our expectations, as we drove exceptional top-line growth for our underground and specialty construction, and golf and grounds businesses,"
and continued to express confidence in the company's ability to deliver growth in fiscal 2024.
Olson also highlighted the company's commitment to innovation and customer care, which continues to drive market leadership. He mentioned the leveraging of Toro's proprietary Hypercell smart battery system to develop high-powered sustainable solutions for professional markets, such as the new Groundsmaster e3200 out-front rotary mower.
Balance Sheet and Cash Flow
The balance sheet shows a healthy cash and cash equivalents position of $198.5 million. Net receivables stood at $489.1 million, and net inventories at $1,177.1 million. The company's total assets amounted to $3,801.1 million.
From a cash flow perspective, net cash used in operating activities was $(92.2) million, and the company used $(19.1) million in investing activities. Financing activities provided $114.1 million, primarily through net borrowings under the revolving credit facility.
The Toro Co (NYSE:TTC) continues to navigate through a challenging economic landscape, balancing strong demand in certain markets with lower shipments and elevated field inventories in others. The reaffirmed guidance for fiscal 2024 reflects management's confidence in the company's strategic direction and resilience in the face of headwinds.
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Explore the complete 8-K earnings release (here) from The Toro Co for further details.
This article first appeared on GuruFocus.
