Toro: Baird Keeps Neutral Rating, Raises PT to $86 from $82.

Toro: Baird Keeps Neutral Rating, Raises PT to $86 from $82.

Baird Financial has maintained its neutral rating on The Toro Company (NYSE: TTC) but has raised its price target to $86 from $82. The update comes following the company's Q3 2025 earnings call, which highlighted a mix of growth and challenges across its professional and residential segments.

Professional Segment Growth and Margin Expansion

The professional segment reported a 6% year-over-year (YOY) growth in sales, driven by strong demand for innovative products and operational improvements. This growth was supported by a 250 basis points (bps) expansion in margins, reflecting net price realization and productivity initiatives. The professional segment's strong performance was noted by Richard Olson, the CEO, who attributed it to new product introductions, particularly the Exmark laser platform.

Residential Segment Challenges

In contrast, the residential segment experienced a 28% YOY decline in net sales due to lower shipments and slower retail sales, influenced by consumer cautiousness and channel inventory levels. The company emphasized efforts to align field inventory with consumer confidence recovery. The residential business and its portion of the landscape contractor business sold to homeowners were primary drivers of the guidance revision.

Tariff Mitigation and Impact

The company faces ongoing tariff impacts, with estimated incremental tariffs of about $45 million, primarily from steel and aluminum. Richard Olson, the CEO, indicated that the company is mitigating these tariffs through pricing, productivity, and supplier optimizations.

AMP Program and Margin Impact

The AMP program delivered $75 million in annualized savings but faces challenges such as $45 million in tariff costs and inventory adjustments. Angela Drake, the CFO, clarified that the record third-quarter margin performance was partly due to the AMP program, with savings from the program expected to continue over the next three quarters of 2025.

Baird's Outlook

Baird's analysts maintain a neutral rating on The Toro Company, citing the company's strong professional segment performance and ongoing residential challenges. They raised their price target to $86, reflecting their view that the company's professional growth will continue to outpace residential recovery, despite tariff impacts and margin neutrality strategies.

References

[1] https://www.ainvest.com/news/toro-company-q3-2025-earnings-call-contradictions-emerge-landscape-contractor-performance-tariff-mitigation-residential-outlook-pro-landscape-demand-amp-program-impact-2509/