The Toro Company (TTC) Q2 2024 earnings summary

Executive summary

• Achieved record Q2 net sales of $1.35 billion, up 0.7%–1% year-over-year, driven by strong residential and underground construction growth, with progress in reducing dealer field inventories and maintaining elevated order backlogs.

• Adjusted diluted EPS was $1.40, down from $1.58 last year, mainly due to product mix shifts and higher costs.

• Strategic priorities include accelerating profitable growth, driving productivity, and empowering people, with continued investment in innovation and operational excellence.

• Reaffirmed full-year fiscal 2024 guidance for low single-digit net sales growth and adjusted diluted EPS of $4.25–$4.35, entering the second half with positive momentum.

• Significant progress in reducing dealer field inventories and improving working capital.

Financial highlights

• Q2 net sales rose to $1,349.0M–$1.35B (+0.7%–1% year-over-year), with residential segment net sales up 26.3% to $335.6M and professional segment net sales down 5.9% to $1,005.6M.

• Adjusted gross margin was 33.6% (down from 35.8% last year); adjusted operating margin was 14.2% (down from 16.3%).

• Adjusted net earnings for Q2 were $147.3M, down 11.5% year-over-year; net earnings were $144.8M.

• Free cash flow year-to-date was $95.6M, nearly $100M higher than last year, with a conversion rate of 45.6%.

• Interest expense was $16.7M, up $2M year-over-year due to higher borrowings and rates.

Outlook and guidance

• Reaffirmed full-year 2024 guidance: low single-digit net sales growth, adjusted diluted EPS of $4.25–$4.35, capital expenditures ~$125M, and free cash flow conversion ~100%.

• Q3 net sales expected to be up high teens year-over-year; adjusted operating margin and EPS anticipated to be higher than last year.

• Professional segment net sales growth to be slightly below company average; residential segment to grow significantly above average.

• Guidance assumes stable demand, cautious consumer/channel behavior, and average weather patterns.

• Full-year free cash flow conversion rate expected at ~100% of net income.