Toro’s Fiscal 2025 Earnings Outlook: A Reassessment of Long-Term Growth Potential

The Toro Company (TTC) has navigated a complex fiscal 2025 landscape, marked by divergent performance across its business segments and a modest earnings per share (EPS) miss relative to expectations. While the company’s third-quarter results revealed a 27.9% decline in residential segment sales due to weak consumer demand [1], its professional segment delivered robust 6% growth and 250 basis points of margin expansion [1]. This duality raises a critical question: does the EPS miss, driven by short-term headwinds, warrant a reevaluation of TTC’s long-term growth potential?

Earnings Performance: Mixed Signals in a Fragmented Market

TTC’s fiscal 2025 third-quarter results underscored structural shifts in its core markets. The residential segment, historically a pillar of the business, has been disproportionately affected by declining homeowner demand, a trend exacerbated by broader macroeconomic pressures such as high interest rates and stagnant wage growth [1]. In contrast, the professional segment—encompassing underground construction and golf and grounds—has thrived, reflecting pent-up demand in commercial and infrastructure markets [1].

The company’s adjusted diluted EPS of $1.24 in Q3 2025, a 5% year-over-year increase, masked a non-cash impairment charge of $0.62 per share related to its Spartan business [1]. This charge, while painful, signals a rationalization of underperforming assets—a strategic move to reallocate capital toward higher-margin opportunities. Management’s emphasis on the AMP productivity program, which aims to generate $100 million in annual savings by 2027 [1], further reinforces a disciplined approach to cost management.

Industry Trends: Tailwinds and Tail Risks

The global lawn and garden equipment market is projected to grow at a 6.4% compound annual rate through 2035, driven by urbanization, sustainability trends, and technological innovation [4]. In the United States, the market is valued at $136.55 billion in 2025, with zero-turn mowers emerging as a key growth driver. Toro’s strategic partnership with Lowe’s has propelled its market share in this category from 9% in 2023 to 25% in 2024 [2], a testament to its ability to capitalize on evolving consumer preferences.

However, the residential segment’s struggles reflect broader industry challenges. According to a report by Future Market Insights, DIY gardening trends and compact tool demand are surging among younger demographics [4], yet these gains have not yet translated into robust sales for TTC. This disconnect suggests that the company may need to recalibrate its product mix or marketing strategies to align with shifting consumer behavior.

Valuation Implications: A Balancing Act

Analysts remain cautiously optimistic about TTC’s valuation. The current consensus price target of $89.60 implies an 8.8% upside from its recent price of $82.36 [4], supported by a strong return on equity (ROE) of 27%, well above the industry average of 13% [5]. However, TTC’s five-year net income growth of 2.4% lags behind the sector’s 17% [5], raising questions about its ability to sustain profitability amid margin compression in the residential segment.

The recent downward revision of full-year 2025 revenue estimates—from $4.62 billion to $4.53 billion—reflects tempered expectations [1]. While management’s guidance of $4.15–$4.30 in adjusted EPS aligns with FactSet estimates [3], the path to achieving this range hinges on the professional segment’s continued outperformance and the successful execution of the AMP program.

Strategic Momentum: A Case for Resilience

TTC’s long-term growth potential ultimately depends on its capacity to leverage structural trends. The integration of smart technologies—such as IoT-enabled irrigation systems and robotic mowers—positions the company to benefit from the $81.9 billion market projected by 2035 [4]. Moreover, its focus on free cash flow generation and operational efficiency provides financial flexibility to navigate near-term volatility.

Critically, the EPS miss in Q3 2025 appears to be a symptom of cyclical factors rather than a fundamental flaw in the business model. The professional segment’s resilience and the company’s strategic pivot toward high-growth areas suggest that TTC is well-positioned to outperform in a reaccelerating market.

Conclusion: A Calculated Investment Case

While the EPS miss warrants scrutiny, it does not invalidate TTC’s long-term growth narrative. The company’s strong ROE, strategic reallocation of resources, and alignment with industry tailwinds—particularly in professional and smart equipment—justify a measured investment approach. Risks remain, notably in the residential segment and execution of cost-saving initiatives, but these are outweighed by the potential for margin expansion and market share gains. For investors with a medium-term horizon, TTC offers an attractive opportunity to capitalize on a sector poised for transformation.

Source:
[1] The Toro Company Reports Fiscal 2025 Third Quarter Results [https://markets.ft.com/data/announce/detail?dockey=600-202509040830BIZWIRE_USPRX____20250904_BW357262-1]
[2] Unlocking Lawn & Garden Growth: What to Know for 2025 [https://www.hiri.org/blog/unlocking-lawn-garden-growth-what-to-know-for-2025]
[3] (TTC) Toro Expects Fiscal 2025 Adjusted EPS About $4.15, vs. FactSet Est of $4.25 [https://www.marketscreener.com/news/ttc-toro-expects-fiscal-2025-adjusted-eps-about-4-15-vs-factset-est-of-4-25-ce7d59d8db8bf324]
[4] Lawn and Garden Equipment Market [https://www.futuremarketinsights.com/reports/lawn-and-garden-equipment-market]
[5] The Toro Company's (NYSE:TTC) Fundamentals Look Pretty ... [https://finance.yahoo.com/news/toro-companys-nyse-ttc-fundamentals-122823582.html]