Breaking Down The Toro Company (TTC) Financial Health: Key Insights for Investors

You're looking at The Toro Company's (TTC) financial health right now, and the numbers are telling a classic tale of two companies operating under one roof, so you need to look past the headline guidance to see the real story. Management expects full-year fiscal 2025 adjusted diluted Earnings Per Share (EPS) to land around $4.15, with total net sales projected to be at the low end of the flat to down 3% range, but that masks a massive internal divergence. The Professional segment is defintely the engine, showing a strong third-quarter earnings margin of 21.3%, driven by underground construction and golf and grounds businesses. But honestly, the Residential segment is a serious drag, with its third-quarter earnings margin collapsing to just 1.9% as homeowner caution pushes sales down by a projected mid-teens for the full year. That's the core risk: the Pros are carrying the load. We need to analyze if the strong free cash flow conversion-now guided at about 110%-is enough to offset the residential weakness and justify the average analyst price target of $90.75.

Revenue Analysis

You need to know where The Toro Company (TTC) is actually making its money, and the story for fiscal year 2025 is a clear split: the Professional segment is carrying the load while Residential sales are in a deep slump. The company's total net sales are expected to be at the low end of guidance, which is flat to down 3% for the full year, a significant deceleration from prior years' growth.

The latest Trailing Twelve Months (TTM) revenue ending July 31, 2025, was $4.52 billion, showing a modest 0.65% year-over-year increase, but that masks the internal shift. Here's the quick math on the current revenue mix, using the latest quarterly data to show where the power lies:

• Professional Segment: The engine of growth.
• Residential Segment: Facing significant market headwinds.

The Professional segment, which includes commercial landscaping, golf, and underground construction equipment, is the clear revenue driver. For the third quarter of fiscal 2025, this segment brought in $930.8 million in net sales, marking a solid 5.7% increase year-over-year. Management expects this segment's full-year revenue to be up slightly year-over-year.

The primary revenue sources within Professional are seeing continued strong demand and stable supply, specifically in underground construction and golf and grounds products. This is where the company's pricing power and productivity improvements are really paying off, with the segment's earnings margin expanding by 250 basis points in the third quarter.

The Residential segment, which sells lawn care and snow removal products to homeowners, is the main near-term risk. Third-quarter net sales plummeted to $192.8 million, a sharp 27.9% decline from the same period last year. This significant change is driven by lower demand from homeowners and a need to normalize dealer field inventories (destocking). The full-year outlook for Residential is a decline in the mid-teens. This is a clear example of macro factors-like cautious consumer spending-directly hitting the top line.

To be fair, about half of the total consolidated net sales decline in Q3 was due to strategic divestitures (selling off non-core assets), not just market weakness. Still, the stark contrast between the two segments means your investment thesis must lean heavily on the stability and growth of the Professional side. For a deeper dive into who is betting on this two-speed performance, you should consider Exploring The Toro Company (TTC) Investor Profile: Who's Buying and Why?

Profitability Metrics

You need to know if The Toro Company (TTC) is turning its sales into real profit, especially in a mixed-demand environment. The direct takeaway is that The Toro Company's profitability in fiscal year 2025 is a story of two segments: its high-margin Professional business is carrying the company, keeping overall margins robust and well above a key competitor's operating margin guidance.

For the third quarter of fiscal 2025, The Toro Company reported an adjusted gross margin of 34.4%, which is a slight dip from the prior year's 35.4% but still strong. This margin is what's left after the cost of goods sold (COGS) is accounted for. The trailing twelve months (TTM) net profit margin, which shows the final profit after all costs including taxes and interest, stood at 7.39% as of July 31, 2025, reflecting the pressure from higher material and manufacturing costs.

• Gross Profit Margin (Q3 FY25 Adjusted): 34.4%
• Operating Profit Margin (Q3 FY25 Adjusted): 13.6%
• Net Profit Margin (TTM July 2025): 7.39%

Trends and Operational Efficiency

The trend in profitability is one of resilience, not unbridled growth. The reported operating earnings margin for Q3 FY25 was 5.7%, a significant drop from 12.8% in the prior year, largely due to a non-cash impairment charge on the Residential segment's Spartan business. However, the adjusted operating earnings margin held nearly flat at 13.6%, down only 10 basis points from the prior year, which is defintely a win given the headwinds.

Here's the quick math on efficiency: The Professional segment, which includes underground construction and golf and grounds, drove this stability, expanding its earnings margin by 250 basis points in Q3 FY25. This is a clear sign of effective operational leverage and pricing power in that division. Management's Amplifying Maximum Productivity (AMP) program is also a concrete cost-management action, targeting at least $100 million in annualized savings by 2027. That's a major commitment to getting leaner.

Industry Comparison: TTC Outperforms

When you compare The Toro Company's profitability to its peers, the strength of its business model becomes clear. The company's adjusted gross margin of 34.4% is at the high end of the general manufacturing industry benchmark, which typically ranges from 25% to 35%.

More critically, The Toro Company's adjusted operating margin of 13.6% in Q3 FY25 significantly outperforms the 2025 outlook for a key agricultural and machinery competitor, AGCO Corporation, which projects its 2025 adjusted operating margin to be between 7.0% and 7.5%. This nearly two-fold difference in operating margin highlights The Toro Company's premium positioning and successful focus on high-margin professional markets.

What this estimate hides is the Residential segment's drag, which saw its Q3 earnings fall to $3.7 million from $32.6 million a year ago, with its margin shrinking from 12.2% to just 1.9%. You need to watch the Residential market recovery closely, as the Professional segment cannot shoulder all the macro-economic pressure indefinitely. For a deeper look at the full financial picture, including valuation, read our complete analysis: Breaking Down The Toro Company (TTC) Financial Health: Key Insights for Investors.

Your next step is to model The Toro Company's full-year net income based on the adjusted diluted EPS guidance of about $4.15 and the low-end net sales guidance (flat to down 3%) to see if the TTM net margin of 7.39% is sustainable.

Debt vs. Equity Structure

The Toro Company (TTC) maintains a balanced, investment-grade capital structure, relying on a mix of debt and equity to fund its strategic growth. As of the quarter ending July 2025, the company's financial leverage remains manageable, which gives them flexibility for market opportunities.

You can see this balance in the company's Debt-to-Equity (D/E) ratio, which stood at 0.81 for the July 2025 quarter. Here's the quick math: total debt of approximately $1.142 billion (Short-Term Debt of $37 million plus Long-Term Debt of $1,105 million) is less than the $1,411 million in Total Stockholders Equity. A D/E of 0.81 suggests that for every dollar of equity capital, The Toro Company uses 81 cents of debt, which is a healthy level for the Industrial Products sector.

This is a solid position. The Industrial Products industry median D/E is often lower, but The Toro Company's ratio is considered appropriate given its current business classification and consistent cash flow. High leverage can mean volatile earnings due to interest expense, but The Toro Company's current level indicates a disciplined approach to using debt for growth without taking on excessive risk.

• Short-Term Debt: $37 million (July 2025)
• Long-Term Debt: $1,105 million (July 2025)
• Debt-to-Equity Ratio: 0.81 (July 2025)

The company's ability to access credit markets at favorable rates is defintely a key factor here. In February 2025, S&P Global Ratings affirmed The Toro Company's Local Currency Long-Term credit rating at 'BBB' with a stable outlook. This is an investment-grade rating, meaning the market views their debt as a lower risk, translating to lower borrowing costs for the company. That stable rating is crucial for funding long-term strategic plans.

A concrete example of this financing strategy is the October 2025 agreement to acquire Tornado Infrastructure Equipment Ltd. for approximately C$279.3 million (Canadian dollars). The Toro Company plans to finance this all-cash acquisition using debt from existing credit facilities and additional arrangements. This is a clear action: they are using debt to fund strategic, accretive growth in their Professional segment while preserving cash flow and maintaining capacity for their stock repurchase program. It's a smart balance of debt financing for expansion and equity management for shareholder returns. For a deeper dive into the company's overall financial picture, check out Breaking Down The Toro Company (TTC) Financial Health: Key Insights for Investors.

Liquidity and Solvency

The Toro Company (TTC) shows a stable but inventory-dependent liquidity position as of the third quarter of fiscal 2025, ending July 2025. Your immediate takeaway should be that while the company can cover its short-term debts, a significant portion of that coverage relies on converting its large inventory stockpile into cash.

Current and Quick Ratios

When assessing a company's immediate ability to pay its bills, we look at the Current Ratio and Quick Ratio (also called the acid-test ratio). The Current Ratio for The Toro Company as of July 2025 stands at approximately 1.88. This is a strong figure; it means the company holds $1.88 in current assets for every dollar of current liabilities, which is a comfortable margin for short-term obligations of $955.9 Million.

But here's the quick math on what that estimate hides: the Quick Ratio is much lower, at just 0.79. This ratio strips out inventory, which is the least liquid current asset. A Quick Ratio below 1.0 means that without selling a single item from its $1,036.2 Million inventory, TTC cannot immediately cover all of its current liabilities. This isn't a red flag for a manufacturer like TTC, but it defintely highlights a reliance on inventory management and sales velocity.

Working Capital and Liquidity Trends

The company's net working capital (current assets minus current liabilities) is a solid $838.1 Million as of Q3 2025, providing a substantial buffer. More importantly, management is actively driving improvement in free cash flow through a period of net favorable working capital. The change in working capital alone contributed $42 Million to operating cash flow in the third quarter. This suggests that while inventory is high, the company is managing its receivables and payables efficiently to free up cash.

The main strength here is the positive momentum in cash generation, even with headwinds in the Residential segment. You want to see this trend continue, especially as they work to reduce the inventory levels that are currently skewing the Quick Ratio.

Cash Flow Statements Overview

The cash flow statement tells the real story of where the money is coming from and where it's going. For the trailing twelve months (TTM) ending July 2025, The Toro Company's cash flow performance is clear:

• Operating Cash Flow (CFO): A robust inflow of $589 Million. This is the core engine of the business, showing strong cash generation from sales and operations.
• Investing Cash Flow (CFI): A net outflow of $-67.00 Million. This is primarily capital expenditure (CapEx) for property, plant, and equipment, which is a healthy sign of reinvestment in the business's long-term growth and productivity programs.
• Financing Cash Flow (CFF): A significant outflow of $-543 Million. This outflow is mainly driven by activities like share repurchases, debt repayment, and dividend payments, demonstrating a commitment to returning capital to shareholders and managing the balance sheet.

The net result of this is that the strong cash generated from operations is being strategically deployed to fund CapEx and, more substantially, to reduce debt and reward shareholders. This is the profile of a mature, well-managed company. You can read more about the strategic implications of these movements in the full post: Breaking Down The Toro Company (TTC) Financial Health: Key Insights for Investors.

Valuation Analysis

The short answer is that The Toro Company (TTC) appears to be trading at a slight discount to its historical valuation multiples, but its recent stock performance suggests caution. As of late November 2025, the stock price is around $69.99, a drop of 17.80% over the last 12 months, which puts it closer to its 52-week low of $62.34 than its high of $89.50.

When you look at the core valuation multiples for the 2025 fiscal year, The Toro Company is not screamingly cheap, but it's not wildly expensive either. Its valuation sits in a range that suggests the market is pricing in some near-term headwinds, which is typical for a trend-aware realist like me.

• Price-to-Earnings (P/E) Ratio: The P/E ratio for FY 2025 is approximately 22.11. This is lower than its historical median, suggesting a potential bargain relative to its own past, but still above the S&P 500 average for the Industrials sector.
• Price-to-Book (P/B) Ratio: The P/B ratio is 5.01. This is a high multiple, indicating that the market values the company's earnings power and brand equity (intangible assets) far more than its tangible assets on the balance sheet.
• Enterprise Value-to-EBITDA (EV/EBITDA): The EV/EBITDA, which accounts for debt, is 12.33 for FY 2025. This is a reasonable number, slightly below its long-term median, which suggests the company's operating performance is not overly inflated in the current stock price.

Here's the quick math: The current stock price of $69.99 is sitting well below the average analyst 12-month target price of $92.60. This difference alone points to a significant potential upside if the company executes its strategy, which you can review in detail in their Mission Statement, Vision, & Core Values of The Toro Company (TTC).

The dividend picture is solid, but not a primary growth driver. The Toro Company offers a dividend yield of about 2.16%, which is respectable and above the sector average. The payout ratio is a healthy 45.9%, meaning less than half of its earnings are used for dividends, leaving plenty of capital for reinvestment or share buybacks. This is defintely a sustainable dividend.

The analyst consensus is a bit mixed, but leans toward caution. Out of seven analysts covering the company, the consensus is a 'Hold,' with four analysts recommending a hold and three recommending a buy. This 'Hold' signal tells you that while the stock is not a screaming 'Sell,' the path to the average price target of $92.60 is not without risk. To be fair, one relative valuation model suggests the stock is undervalued by as much as 35%, with a fair value estimate of $107.63.

What this estimate hides is the risk from macroeconomic uncertainty impacting professional and residential equipment sales. Still, the core takeaway is clear:

Your action here is to treat The Toro Company as an 'Accumulate' on weakness, not a 'Strong Buy' at its current price. Wait for a dip below $68 or a clear earnings beat to confirm the upside. Finance: Monitor gross margin trends in the next quarterly report for signs of pricing power.

Risk Factors

You're looking at The Toro Company (TTC) and seeing a strong Professional segment, but you need to be a realist about the headwinds. The biggest risk right now isn't a single catastrophic event, but a divergence in performance between their two core business units, plus a few macroeconomic pressures we can't ignore.

The near-term risks map to clear actions, so let's break down the internal and external factors driving The Toro Company's financial health in fiscal year 2025.

External Headwinds: The Macroeconomic Squeeze

The primary external risks stem from a cautious consumer and persistent global cost pressures. Honestly, high interest rates and inflation are making homeowners defer big-ticket purchases, and that's hitting the Residential segment hard. This is the core of the problem.

• Residential Demand Drop: Net sales for the Residential segment in the third quarter of fiscal 2025 were down a significant 27.9% to $192.8 million, a clear sign homeowners are pulling back.
• Commodity and Tariff Costs: The company is still dealing with fluctuations in material costs for things like steel, engines, and resins. Plus, the anticipated tariff impact for fiscal 2025, though mitigated, is still estimated at $45 million.
• Weather Volatility: The effect of unpredictable weather is always a risk for outdoor equipment. Poor snowfall, for instance, can depress sales in the snow and ice management category, though the company plans for weather patterns aligned with historical averages for the remainder of the year.

The good news is The Toro Company has been proactive on tariffs, expecting to remain margin-neutral by year-end through pricing actions and productivity gains. That's defintely a smart move to insulate the bottom line.

Internal and Operational Risks

The Toro Company's internal risks center on segment imbalance and strategic asset management. The core operational risk is that the Professional segment, while strong, can't fully offset the Residential weakness indefinitely.

The Professional segment, which includes underground construction and golf and grounds, is the current engine, with Q3 net sales up about 6% to $931 million, and its earnings margin expanding by 250 basis points. But the Residential segment's deep decline is causing channel inventory (dealer stock) to remain a concern, which could stall future orders.

A major strategic risk materialized in Q3 2025 with a non-cash impairment charge of $0.62 per diluted share, or $81 million pre-tax, related to the Spartan trade name intangible assets. This signals a rationalization of underperforming acquisitions, which is a necessary but painful financial hit.

Mitigation and Actionable Resilience

Management is taking decisive, concrete actions to navigate these risks, focusing on operational excellence and cost control. Their strategy is to deliver earnings growth even if revenue remains flat, which is why the full-year fiscal 2025 net sales guidance is flat to down 3%, with adjusted diluted earnings per share projected at about $4.15.

Here's the quick math on their cost-saving initiatives:

This focus on efficiency and the strength in the Professional segment are the company's shock absorbers against the Residential slowdown. Understanding Mission Statement, Vision, & Core Values of The Toro Company (TTC). helps you see the long-term strategic commitment to these professional markets.

Next Step: Finance should model a stress test showing the impact on net income if Residential sales drop another 10% in Q4, and what additional cost cuts would be required to maintain the $4.15 EPS floor.

Growth Opportunities

You're looking for where The Toro Company (TTC) will find its growth, and the answer is clear: the Professional segment is the engine, while operational efficiency is the turbocharger. The near-term challenge is the Residential market, but the company is making strategic moves now that will pay off over the next few years.

For fiscal year 2025, the company expects total net sales to be at the low end of its guidance, which is flat to down 3% year-over-year. This is a mixed picture, but the strength in the Professional segment is defintely a key takeaway, with revenue expected to be up slightly year-over-year, even as the Residential segment is projected to be down mid-teens due to consumer caution. The company is actively managing this by focusing on what it can control.

Here's the quick math on the operational side: the Amplifying Maximum Productivity (AMP) initiative is a major tailwind. This cost-saving program is on track to deliver at least $100 million in annualized run-rate savings by fiscal year 2027. As of the second quarter of 2025, they had already generated $70 million in run-rate savings. That cash generation is also strong, with free cash flow conversion guidance increased to about 110%.

• Professional segment drives near-term revenue.
• Cost-cutting initiative is a significant profit lever.
• Innovation pipeline remains robust.

Product Innovation and Market Expansion

The core growth drivers are product innovation and strategic market expansion, especially within the Professional segment. We're seeing a significant push into autonomous and electric solutions, which gives The Toro Company a competitive advantage (a durable moat) in a labor-constrained market. For instance, their autonomous technology, accelerated by acquisitions like Left Hand Robotics and TURFLYNX, includes the new Toro Turf Pro autonomous mower and the Greensmaster® eTriflex®, an all-electric riding greensmower that eliminates hydraulic fluid.

The company is doubling down on its strongest markets. Demand in the underground construction and golf and grounds businesses remains strong and stable. The October 2025 announcement to acquire Tornado Infrastructure Equipment Ltd. is a concrete example of this strategy, expanding their underground and specialty construction product portfolio with vacuum excavation trucks for critical infrastructure needs. This is a smart move to capture multi-year visibility in infrastructure spending.

The Professional segment's strength is evident in its profitability, with the segment's earnings margin hitting 21.3% in the third quarter of 2025, up 250 basis points from the prior year. That's a powerful margin expansion that helps offset the Residential slump.

Future Earnings and Competitive Moat

While the full-year adjusted diluted earnings per share (EPS) is expected to be about $4.15, the underlying strategic moves position the company for a stronger rebound when the Residential market normalizes. The company's competitive advantage is built on a portfolio of iconic brands-Toro, Exmark, and Ditch Witch-combined with a reputation for reliability and quality that makes them an indispensable partner to professional customers.

The investment in technology is not just for the golf course; it's for all professional users. They are also strengthening partnerships, such as with Sentosa Golf Club, providing advanced equipment and precision irrigation systems to support efficient course management. This real-world testing and validation is critical.

To see how these growth drivers map back to the overall financial health, you can check out the full analysis at Breaking Down The Toro Company (TTC) Financial Health: Key Insights for Investors.

For a quick view of the fiscal 2025 outlook:

The key action for you is to monitor the Professional segment's margin expansion and the progress of the AMP program. If the Professional segment can maintain or expand margins above 21%, it provides a solid floor for the stock while the Residential segment clears its inventory and awaits a consumer sentiment shift.