F26 Q3
Filed Sep 3, 2026The Toro Company Reports Record Third-Quarter Results Raises full-year guidance based on continued strong demand trends
Net sales increased 8.4%, reported diluted EPS increased 50.0%, adjusted diluted EPS increased 7.3%, both operating margin measures expanded, and the company raised full-year net sales growth and adjusted EPS guidance.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net salesGAAP | $1,225.8 million | – | 8.4% |
| Gross profitGAAP | $418.1 million | – | – |
| Gross marginGAAP | 34.1% | – | – |
| Adjusted gross profitnon-GAAP | $429.6 million | – | – |
| Adjusted gross marginnon-GAAP | 35.0% | – | – |
| Selling, general and administrative expenseGAAP | $259.8 million | – | – |
| SG&A expense as a percentage of net salesGAAP | 21.2% | – | – |
| Non-cash impairment chargeGAAP | $43.1 million | – | – |
| Operating earningsGAAP | $115.2 million | – | – |
| Operating earnings marginGAAP | 9.4% | – | – |
| Adjusted operating earningsnon-GAAP | $170.7 million | – | – |
| Adjusted operating earnings marginnon-GAAP | 13.9% | – | – |
| Interest expenseGAAP | $13.8 million | – | down $1.3 million |
| Other income, netGAAP | $5.5 million | – | – |
| Earnings before income taxesGAAP | $106.9 million | – | – |
| Adjusted earnings before income taxesnon-GAAP | $163.3 million | – | – |
| Income tax provisionGAAP | $29.9 million | – | – |
| Reported effective tax rateGAAP | 28.0% | – | – |
| Adjusted effective tax ratenon-GAAP | 22.4% | – | – |
| Net earningsGAAP | $77.0 million | – | 43.9% |
| Adjusted net earningsnon-GAAP | $126.8 million | – | 3.5% |
| Basic net earnings per share of common stockGAAP | $0.81 | – | – |
| Diluted net earnings per share of common stockGAAP | $0.81 | – | 50.0% |
| Adjusted net earnings per diluted sharenon-GAAP | $1.33 | – | 7.3% |
| Weighted-average number of shares of common stock outstanding — BasicGAAP | 95.2 million | – | – |
| Weighted-average number of shares of common stock outstanding — DilutedGAAP | 95.6 million | – | – |
| International net salesGAAP | $231.9 million | – | – |
| Nine-month net salesGAAP | $3,686.8 million | – | 7.0% |
| Nine-month net earningsGAAP | $290.3 million | – | – |
| Nine-month diluted net earnings per share of common stockGAAP | $2.99 | – | – |
| Nine-month adjusted net earnings per diluted sharenon-GAAP | $3.66 | – | – |
| Nine-month free cash flownon-GAAP | $425.1 million | – | – |
| Nine-month free cash flow conversion percentagenon-GAAP | 127.5% | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| ProfessionalHigher volume, net price realization, and the Tornado acquisition. | $1,012.6 million | – | 8.8% |
| ResidentialHigher volume of walk power mowers and net price realization. | $209.3 million | – | 8.6% |
| OtherNot provided. | $3.9 million | – | (49.4)% |
fiscal 2026 outlook
- Revenuetotal company net sales growth in the range of 6.3% to 6.6%
- NoteAdjusted EPS in the range of $4.60 to $4.65.
Capital returns
- Returned $110 million to shareholders in the third quarter, bringing the year-to-date total to $471 million.
- Nine-month common stock repurchases were $358.1 million, compared with $290.0 million.
- Nine-month dividends paid on common stock were $112.8 million, compared with $113.8 million.
What drove it
- Professional organic sales growth was 6.1%, while Residential organic sales growth was 8.5%.
- Gross-margin expansion was driven by net price realization, productivity improvements, and net sales leverage.
- Residential segment earnings improved through productivity improvements, net price realization, net sales leverage, and prior-year inventory valuation adjustments that did not recur.
- Lower average interest rates and lower average outstanding borrowings reduced interest expense.
- The company cited sustained demand across its portfolio, strong customer response to innovative new products, and disciplined execution in raising guidance.
Concerns
- Professional segment earnings margin was 20.9%, down from 21.3%, primarily due to higher material and manufacturing costs and product mix.
- SG&A expense as a percentage of net sales increased to 21.2% from 20.8%, primarily driven by higher incentive expenses.
- Reported effective tax rate increased to 28.0% from 7.4%, primarily due to non-recurring adjustments and a less favorable geographic mix of earnings.
- Adjusted effective tax rate increased to 22.4% from 17.3%, primarily due to a less favorable geographic mix of earnings.
- The company recorded $43.1 million of non-cash impairment charges related to manufacturing facility and product line exits.
- Other segment reported GAAP net sales growth was (49.4)%.
What to watch
- Execution against fiscal 2026 total company net sales growth guidance of 6.3% to 6.6%.
- Delivery against adjusted EPS guidance of $4.60 to $4.65.
- Professional segment margin performance amid higher material and manufacturing costs and product mix.
- Inventory management following inventories of $882.7 million as of July 31, 2026.
- Continued productivity benefits and charges associated with the AMP initiative.
- Integration costs and purchase-accounting effects associated with Tornado Infrastructure Equipment.
Balance sheet and cash flow
- Cash and cash equivalents were $175.3 million as of July 31, 2026, compared with $201.0 million as of August 1, 2025 and $341.0 million as of October 31, 2025.
- Inventories, net were $882.7 million as of July 31, 2026, compared with $1,036.2 million as of August 1, 2025 and $920.8 million as of October 31, 2025.
- Long-term debt, less current portion was $962.0 million as of July 31, 2026, compared with $1,012.2 million as of August 1, 2025 and $921.5 million as of October 31, 2025.
- Nine-month net cash provided by operating activities was $476.2 million, compared with $348.9 million.
- Nine-month purchases of property, plant, and equipment were $51.1 million, compared with $57.0 million.
- Nine-month acquisitions, net of cash received were $210.3 million, compared with $4.2 million.
- Nine-month net cash used in financing activities was $396.5 million, compared with $298.1 million.
Analysis
The Toro Company reported record fiscal third-quarter net sales of $1,225.8 million, up 8.4% from $1,131.3 million. Reported net earnings increased to $77.0 million from $53.5 million and reported diluted EPS rose to $0.81 from $0.54. Adjusted net earnings were $126.8 million, compared with $122.5 million, while adjusted diluted EPS increased to $1.33 from $1.24. The difference between reported and adjusted results reflects, among other items, productivity initiative charges and acquisition-related costs.
Professional was the principal sales contributor, with net sales of $1,012.6 million, up 8.8%, driven by higher volume, net price realization, and the Tornado acquisition. Professional organic sales growth was 6.1%. Residential net sales increased 8.6% to $209.3 million, led by higher walk power mower volume and net price realization, and Residential organic sales growth was 8.5%. Residential segment earnings increased to $12.4 million from $3.7 million, while Professional segment earnings increased to $211.8 million from $198.5 million.
Margins improved at the consolidated level. Gross margin increased to 34.1% from 33.7%, and adjusted gross margin increased to 35.0% from 34.4%, supported by price realization, productivity improvements, and sales leverage. Reported operating earnings margin expanded to 9.4% from 5.7%, while adjusted operating earnings margin rose to 13.9% from 13.6%. Professional segment margin declined to 20.9% from 21.3%, however, as higher material and manufacturing costs and product mix more than offset some of the pricing, productivity, and leverage benefits. SG&A as a percentage of sales increased to 21.2% from 20.8% due primarily to higher incentive expenses.
Cash generation strengthened in the first nine months. Net cash provided by operating activities was $476.2 million, compared with $348.9 million, and free cash flow was $425.1 million, compared with $291.9 million. Free cash flow conversion percentage was 127.5%, compared with 90.0%. Inventories declined to $882.7 million as of July 31, 2026 from $920.8 million as of October 31, 2025. The company used $358.1 million for share repurchases and paid $112.8 million in dividends during the nine-month period.
Management raised fiscal 2026 guidance, now expecting total company net sales growth of 6.3% to 6.6% and adjusted EPS of $4.60 to $4.65. The revised ranges compare with the company’s stated previous ranges of 4.0% to 6.5% for net sales growth and $4.50 to $4.62 for adjusted EPS. The guidance increase follows demand strength across the portfolio, new-product response, productivity-led margin expansion, and inventory-management progress. Investors should monitor whether material and manufacturing costs, product mix, higher incentive expense, and the less favorable geographic mix of earnings continue to limit margin and tax-rate performance.
Management, verbatim
Strong momentum continued in the third quarter, supported by sustained demand across our portfolio and our consistent focus on operational excellence and margin expansion.
Richard M. Olson, chairman and chief executive officer
The Professional segment demand drives overall performance, aided by Residential improvement on both the top and bottom line.
Richard M. Olson, chairman and chief executive officer
We continue to reduce inventory and improve working capital. These company initiatives also drive robust free cash flow and value creation for our shareholders, through dividends and share repurchases .
Richard M. Olson, chairman and chief executive officer
Not in the filing
stated, not guessed- Prior-quarter comparisons for reported metrics were not provided.
- Quarterly operating cash flow and quarterly free cash flow were not provided.
- GAAP diluted EPS guidance was not provided, and the company did not provide a quantitative reconciliation from projected adjusted diluted EPS to GAAP diluted EPS.
- Forward guidance for gross margin, operating expenses, and tax rate was not provided.
- A separate previous-release outlook was not provided; therefore, no actual-versus-prior-guidance comparison has been made.
- Quarterly capital-expenditure figure was not provided.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.