Toro Stock is Worth Getting Off Season

Lawnmower and equipment maker The Toro Company NYSE: TTC stock is providing a nice seasonal pullback after peaking in the spring. The iconic maker of lawnmowers and landscaping equipment is taking a deep pullback after peaking at $115.24 in April.  The Company is undergoing a transformation towards robotics and autonomous technology with self-driving mowers and equipment. This was evident by its acquisition of two companies, Left Hand Robotics and TURFLYNX, in the autonomous space specializing in autonomous mowing and plowing technology. While most may identify Toro as just a lawnmower maker for the summertime, they also produce plowing equipment and snow blowers used in harsh winters. The Company is also working on alternate energy to fuel its machines and smart connected products to underground construction making it an infrastructure play. The key concern for investors is supply chain disruption, rising inflation and its impact on margins. Prudent investors seeking exposure in a familiar landscaping and small construction equipment maker can watch for opportunistic pullbacks in shares of Toro.

Q3 FY 2021 Earnings Release

On Sept. 2, 2021, Toro released its fiscal third-quarter 2021 results for the quarter ending July 2021. The Company reported an earnings-per-share (EPS) profit of $0.92 excluding non-recurring items versus consensus analyst estimates for a profit of $0.79, an $0.13 beat. Revenues grew 16.1% year-over-year (YoY) to $976.2 million beating analyst estimates for $954.66 million. Toro CEO Richard Olson commented, “Robust sales continued throughout the quarter in both our professional and residential segments. As we capitalized on the current demand environment and focused on serving our customers, our dedicated team and channel partners demonstrated extraordinary resolve in navigating global supply chain challenges. We delivered double-digit net sales growth for the second quarter in a row for the professional segment, with continued strength in landscape contractor and golf markets worldwide, increased pre-season shipments of BOSS snow and ice management products, and higher demand for rental and specialty construction equipment and Ventrac products. Residential segment net sales were also up double-digits on top of a very strong third quarter last year, driven by increased retail demand for zero-turn and walk power mowers. Customers are excited about our new and enhanced products across both segments, including our expanding line of battery-powered offerings. Our continued investment in key technology areas underscores our commitment to provide a broad range of innovative and sustainable solutions.”

Raised Full-Year 2021 Guidance

Toro raised its fiscal full-year 2021 guidance with EPS coming in between $3.53 to $3.57, up from $3.45 to $3.55, versus $3.57 consensus analyst estimates. Revenues are expected to grow 17% YoY to $3.95 billion versus $3.85 billion consensus estimates.   

Conference Call Takeaways

CEO Olson set the tone, “We saw a continued strength in landscape contractor and golf markets worldwide. Higher pre-season shipments of both snow and ice management products, and strong demand for our rental and specialty construction equipment, and then track products. Our lineup of innovative products combined with strong business confidence fueled robust demand. Residential segments net sales were up 23% and that comparison is on top of a 38% growth rate in our third quarter of last year. Growth in the quarter was driven by strong retail demand for our zero-turn and walk-power mowers. Customers also continue to respond favorably to our all-season Flex-Force 60-volt product lineup which offers power and durability with no compromise on performance. The recent actions we've taken to introduce innovative new products, refresh marketing and expand mass retail distribution continues to strengthen the Toro brand and drive positive results.”

Supply Chain and Labor Pressures

CEO Olson addressed supply chain issues, “As noted last quarter, we expected supply chain constraints and inflationary pressures to escalate at a rate faster than could be fully offset in the near term through pricing and other mitigating actions. Despite these challenges, both segments delivered solid earnings growth in the third quarter of professional earnings up 7.6% and residential earnings up 10.5%.” He also noted tight labor market concerns, “…we saw an increasingly challenging labor market, including wage pressures and workforce availability limitations in some of our manufacturing locations. Across the enterprise, we have talented and dedicated teams committed to serving our customers. We're focused on having a workforce and other resources in place to put ourselves in the best position to meet demand and deliver our products to the right places at the right time.” He concluded, “We have the financial capacity to invest in the future and we continue to allocate capital to best drive value for all stakeholders. This fiscal year, we've made strategic investments in key technologies both organically and through acquisitions to advance our priority areas of alternative power, smart connected, and autonomous.”

TTC Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the price action playing field for TTC shares. The weekly rifle chart  bottomed near the $92.79 Fibonacci (fib) level. The weekly 5 period moving average (MA) slowed it descent to flatten at $97.92 as the 15-period MA continues to slip near the $104.43 fib. The weekly market structure low (MSL) buy triggers on the breakout above $101. The daily rifle chart is attempting a breakout on the rising 5-period MA at $97.97 attempting to crossover the 15-period MA at $98.02 powered by the daily stochastic mini pup with daily upper Bollinger Bands (BBs) at $102.74.Prudent investors can watch for opportunistic pullback levels at the $98 daily 5-period MA, $97.36 fib, $95.18 fib, $93 fib, and the $89.89 fib. Upside trajectories range from the $109.43 fib up towards the $127.93 fib level.