TTC Q2 Deep Dive: Professional Segment Strength and Residential Headwinds Shape Outlook

September 05, 2025 at 01:31 AM EDT

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Outdoor equipment company Toro (NYSE: TTC) missed Wall Street’s revenue expectations in Q2 CY2025, with sales falling 2.2% year on year to $1.13 billion. Its non-GAAP profit of $1.24 per share was 2.1% above analysts’ consensus estimates.

Is now the time to buy TTC? Find out in our full research report (it’s free).

The Toro Company (TTC) Q2 CY2025 Highlights:

Revenue: $1.13 billion vs analyst estimates of $1.16 billion (2.2% year-on-year decline, 2.2% miss)
Adjusted EPS: $1.24 vs analyst estimates of $1.22 (2.1% beat)
Adjusted EBITDA: $186.2 million vs analyst estimates of $193.8 million (16.5% margin, 3.9% miss)
Management lowered its full-year Adjusted EPS guidance to $4.15 at the midpoint, a 1.8% decrease
Operating Margin: 5.7%, down from 12.8% in the same quarter last year
Market Capitalization: $7.89 billion

StockStory’s Take

The Toro Company’s second quarter results reflected the ongoing divergence between its strong professional equipment segment and continued weakness in residential demand. Management cited robust sales in underground construction and golf products as key drivers of professional segment growth, while persistent consumer caution weighed on residential sales. CEO Rick Olson noted, “Our third quarter results reflect this strong positioning,” but also acknowledged that lower homeowner demand and channel partner inventory reductions held back overall sales. The company’s efforts to drive cost savings and productivity improvements partially offset these pressures.

Looking forward, management’s reduced profit outlook is shaped by near-term consumer caution and ongoing softness in residential markets. CFO Angie Drake stated that the company expects continued headwinds from homeowners and channel partners, even as professional segment demand remains healthy. The company’s strategic focus includes continued operational improvements, tariff mitigation, and investment in technology and product innovation. Management remains committed to enhancing operating leverage and sees the professional segment as a source of sustainable margin improvement as markets normalize.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to growth in professional equipment, ongoing operational efficiency gains, and strategic actions to address residential market softness.

Professional segment momentum: The professional equipment business saw solid growth, particularly in underground construction and golf and grounds solutions, with management highlighting a 6% year-over-year increase in segment sales and continued margin expansion driven by productivity and pricing initiatives.
Residential segment challenges: Residential equipment sales declined as homeowners deferred large purchases and channel partners remained cautious about inventory levels. Management emphasized that actions to reduce field inventory should position the company for a stronger start to next year’s spring selling season.
Productivity and cost savings: The AMP productivity program delivered $75 million in annualized cost savings to date, with management reiterating its goal to reach at least $100 million by 2027. A portion of these savings is being reinvested in technology and innovation.
Tariff mitigation strategies: Management detailed ongoing efforts to offset the impact of higher tariffs on materials, including selective price increases and supply chain adjustments. These measures, combined with productivity gains, are intended to keep margins stable despite external cost pressures.
Portfolio and channel adjustments: The company continues to refine its product portfolio, divesting certain non-core assets and focusing on high-demand categories. Channel inventory management, particularly in residential and underground, remains a key operational focus.

Drivers of Future Performance

Toro’s outlook is shaped by persistent residential demand weakness, stable professional segment growth, and the impact of tariffs and operational efficiency initiatives.

Residential market uncertainty: Management expects continued consumer reluctance to make big-ticket purchases, with any recovery seen as dependent on improved economic confidence or lower interest rates. The residential segment’s margins are forecasted to remain below historical norms in the near term, with a gradual return toward 8-10% margins as market conditions improve.
Professional segment stability: The professional business, especially in underground construction and golf, is anticipated to remain a source of relative strength. Management cited healthy order books and ongoing infrastructure investment cycles as supporting a more robust outlook for this segment, with further room for margin expansion as cost-saving initiatives continue.
Tariff and cost headwinds: While tariff mitigation and productivity projects are expected to help preserve margins, management cautioned that ongoing material and manufacturing cost inflation, as well as changing product mix, could weigh on results. The company is targeting a margin-neutral outcome by year-end through a combination of pricing and efficiency measures.

Catalysts in Upcoming Quarters

In the coming quarters, our team will closely monitor (1) inventory normalization in the residential and dealer channels, (2) ongoing margin performance in the professional segment as cost initiatives scale, and (3) the pace of recovery in homeowner demand, especially if macroeconomic conditions or interest rates shift. Execution on new product launches and the impact of tariff mitigation strategies will also be important indicators of the company’s ability to deliver on its operational targets.

The Toro Company currently trades at $80.71, in line with $80.64 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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