On Thursday, Baird, a financial services firm, adjusted its price target for Toro Company (NYSE:TTC), a leading provider of outdoor maintenance and landscaping equipment. The price target was lowered from $92.00 to $88.00. Despite this change, the analyst maintained a Neutral rating on the stock. With a current market capitalization of $8.36 billion and trading near its 52-week low, InvestingPro analysis suggests the stock is currently undervalued, offering potential upside for investors.
The revision follows Toro's announcement of its fiscal quarter four results, which aligned with expectations, and its forecast for the first quarter of fiscal year 2025, which did not meet market anticipation. The company's shares experienced a drop after the guidance was released, signaling investor disappointment. Despite current challenges, InvestingPro data reveals Toro's strong financial foundation, with a healthy current ratio of 1.94 and a 21-year track record of consecutive dividend increases.
The analyst remarked that there have been no significant shifts in the end-market trends for Toro. However, the company faces challenges with its channel inventories, particularly in the landscape and residential sectors, as the selling season concludes. This inventory will need to be managed as the company moves into fiscal year 2025, potentially impacting the first half of the year.
While the risk/reward balance for Toro's shares appears positive in numerical terms, the analyst expressed concerns about the synchronization of the company's main markets. The residential and landscape markets are currently struggling, while the golf and underground sectors are performing well. The analyst anticipates that as residential and landscape markets normalize, there might be a moderation in the golf and underground markets, which could limit Toro's overall growth in the coming 12 to 24 months.
In other recent news, The Toro Company (NYSE:TTC) reported fourth-quarter earnings and revenue that fell short of expectations. The outdoor equipment manufacturer posted adjusted earnings per share of $0.95, missing the analyst consensus of $0.97. Additionally, revenue rose 9.4% year-over-year to $1.08 billion, slightly below estimates of $1.09 billion.
Toro's outlook for the upcoming fiscal year also did not meet Wall Street projections. The company expects full-year 2025 adjusted EPS between $4.25 and $4.40, well below the $4.58 analysts were anticipating. For the full fiscal 2024 year, Toro reported net sales of $4.58 billion, up slightly from $4.55 billion in 2023. Adjusted EPS came in at $4.17, compared to $4.21 the previous year.
In other developments, Toro highlighted significant improvement in cash generation, which supported increased share repurchases. Free cash flow rose to over $470 million for the year. Despite the weak guidance, CEO Richard M. Olson expressed confidence in Toro's ability to deliver earnings growth, supported by the company's diverse portfolio and productivity initiatives.
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