Toro Co. could use a good summer — with fast-growing green grass.
The company reported fiscal second-quarter earnings Thursday that beat Wall Street’s profit expectations but missed on revenue. It also updated its forecast, with a much lower guidance for the third quarter and full year than analysts anticipated.
Toro’s stock fell 5 percent to $83.17 per share Thursday.
Executives noted that a mild winter and cold spring had built up inventory of residential lawn equipment and snow products that would have to be worked on throughout the year.
For the quarter ended April 29, the Bloomington-based maker of lawn mowers, snow throwers and snowplows reported profits that rose 12.7 percent to $106 million, or $1.89 per share.
Sales rose 1 percent to $836 million. Analysts expected sales of $854 million and a profit of $1.79 per share.
Executives said the quarter’s slight sales increase was due largely to strong demand for its professional landscape contractor, golf and specialty construction equipment products that Toro just started selling a few years ago. Residential product sales dipped during the quarter.
Profits were bolstered by productivity gains, cost controls and improved pricing of raw materials.
In a conference call with analysts, Chief Executive Michael Hoffman said residential sales were initially helped by the early warm spring, but then hampered by cold weather later in the quarter. Snow-product sales also were soft because of a mild winter.
Hoffman said Toro is working through higher-than-normal inventory of residential riding mowers after putting more products into stores earlier in the year in an effort to become a “better supplier” to retailers after being caught short last year.
On snow products, the inventory buildup was due to the year’s mild winter, a problem that may not be worked out until consumers start thinking about snowblowers and snowplows again later this year.
“We will increase our efforts on those things within our control, including reducing inventory levels for the second half of the fiscal year,” Hoffman said.
Toro wasn’t the only firm disappointed by weak snowfall. Polaris Industries’ snowmobile sales sank 25 percent last year and grew 2 percent during its recent first quarter. Arctic Cat’s snowmobile sales fell 14 percent for the year over year ending in March.
Toro officials told analysts Thursday that snow will come again, and they will be ready.
Still, the company now expects total revenue growth for this financial year to be in a range from flat to up 2 percent. That’s a decrease from its prior 4 percent forecast. Toro expects profits to range from $3.90 to $4 per share. That’s up from the prior forecast of 3.85 to $3.95, but below the $4.02 that Wall Street analysts had forecast.
For its third quarter, Toro said it expects a profit of 95 cents a share, below the $1.05 analysts had forecast.