Weather, economy dampen Toro's sales

The firm lowered its sales and profit forecasts for the year.

Mike Hoffman

In announcing third-quarter earnings Thursday, Toro Co. lowered its sales and earnings forecasts for fiscal 2012, citing the weak U.S. economy, struggles in Europe and severe drought in much of the United States.

The Bloomington-based maker of professional and residential lawn mowers and turf irrigation systems said it now expects sales to grow just 4 to 5 percent in 2012 and earnings to reach about $2.10 per share.

That's down from the May forecast, when officials predicted sales growth of 7 to 8 percent and earnings of $2.15 per share.

The shift largely stems from tough weather that dented residential sales. Total third-quarter revenue rose less than 1 percent to $504.1 million from a year ago.

Earnings, however, rose 15.6 percent to $40.5 million, or 67 cents per share, beating analysts' expectations by a nickel. Toro shares fell slightly Thursday, closing at $37.47, down 10 cents a share.

In a call with management Thursday morning, analysts expressed concerns with the guidance downgrade and rising inventory levels.

CEO Mike Hoffman told analysts that Toro is adjusting inventory levels after a mild winter with little snow and a dry summer with many municipal watering bans. While the company expected problems with the economy, it didn't expect the worst U.S. drought in 50 years and excessive rain in key Australian and Asian markets, he said.

Results were "somewhat disappointing," he said. "Extreme lack of moisture across most of [this] country, coupled with the continuing global economic issues slowed the robust sales momentum we generated during our first two quarters."

Still Toro's professional golf, landscape contractor and grounds and micro irrigation divisions performed well in North America, he said. The golf segment, in particular, benefited as course managers made equipment purchases put off during the recession.

Revenue for the nine months ended Aug. 3 was $1.62 billion, up 6.8 percent from $1.52 billion in the same period last year. Earnings for the nine months were $129.3 million, or $2.13 per share, up 14.8 percent and 21 percent, respectively.

Dee DePass • 612-673-7725

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