The strange weather has taken a toll on Toro Co.'s snowblower and lawn mower sales.
Yet the Bloomington company on Thursday managed to beat second-quarter earnings estimates as profits grew in other businesses.
Toro has struggled with seasonal weather that has been wildly out of sync with normal patterns. In its just-completed second quarter, the company suffered a 13.2 percent decline in consumer sales as customers saw less need to buy mowers for snow-covered lawns.
Fortunately for Toro, that was more than counterbalanced by an 8.9 percent sales increase in its professional products — for landscaping, golf course maintenance and agricultural irrigation — that make up just over two-thirds of total revenue, said Peter Johnson, an analyst at Mairs and Power, a St. Paul mutual fund company.
"We thought that sales of residential equipment would be down" because of the weather, Johnson said. "We thought that the professional segment might also be weak, so to see it this strong was a pleasant surprise."
As a result, Toro beat Wall Street estimates for the quarter, earning $1.32 per share. Analysts had expected $1.19 per share. The company earned $78.4 million, up 13.9 percent, on sales of $704.5 million, up 1.9 percent. Wall Street had been expecting sales of $700.35 million.
The stock closed at $48.23 per share, up $1.78, or nearly 4 percent. Trading volume was three times the daily average.
The reasons for Toro's consumer sales woes aren't hard to understand, Toro told analysts Thursday after the early-morning release of its earnings.
Last fall, the usually predictable stream of snowblower sales was lower than expected; Toro believes it was because there had been little snowfall the previous winter and consumers weren't sure they needed to invest in snow removal.
But when snow began falling regularly in March and April, it was too late in the season for most consumers to justify buying a snowblower, Toro said.
Similar problems beset lawn mower sales. Mower purchases that normally occur in March and April were deferred because the grass was invisible beneath the snow. Toro hopes to make up for most of those lost sales during the summer, but acknowledges that it probably can't recoup all of them.
Largely as a result of its lower consumer sales, Toro has reduced its revenue growth outlook for this year, dropping its previous expectations of a 4 to 5 percent increase to 3 to 4 percent increase. Its earnings projections for the year remained unchanged.
Toro now expects full-year net earnings of $2.40 to $2.45 per share, up 12 to 15 percent. If annual revenue grows the expected 3 to 4 percent, it would be about $2.02 billion to $2.04 billion. Wall Street has been expecting full-year earnings of $2.46 per share on revenue of $2.04 billion.
"Even with a marginal winter season and late start to spring, we remain cautiously optimistic about the remainder of the year," said Toro CEO Michael Hoffman.
Needless to say, Toro's looking for a little good news about the weather, and it may have found some.
Toro believes that consumers are likely to buy more snowblowers than usual this fall, because they'll believe it's really going to snow next winter.
In addition, the company believes that lawn mower sales will be up this summer because many consumers didn't buy mowers during the snowy spring. What's more, Toro believes this summer's lawn mower sales will look particularly good to investors when compared to last year's drought-depressed summer lawn mower sales.
Now the question is whether the weather will cooperate with those seasonal sales projections. "Given a normal weather pattern going forward, things will improve for Toro," Johnson said. "And that's a fair expectation."