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Category: The Toro Company (TTC)
Date: 22 December 2020 Stock price of Toro Company (TTC): $94.15 We take a look detailed look at The Toro Company a worldwide provider of innovative solutions for the outdoor environment. In their 2019 fiscal year the group reported net sales of $3.138 billion and diluted earnings per share of $3
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Our strong fourth-quarter results were driven by continued sales growth in our residential segment and a rebound in our professional segment - Richard M. Olson, chairman and chief executive officer"
More About The Toro Company
With roots dating back to 1914, The Toro Company was built on a tradition of quality and caring relationships. Today, the company is a leading worldwide provider of innovative solutions for the outdoor environment including turf and landscape maintenance, snow and ice management, underground utility construction, rental and specialty construction, and irrigation and outdoor lighting solutions. Through a strong network of professional distributors, dealers, rental stores and retailers in more than 125 countries, we proudly offer a wide range of products across a family of global brands to help golf courses, professional contractors, underground construction professionals, groundskeepers, agricultural growers, rental companies, government and educational institutions, and homeowners – in addition to many leading sports venues and historic sites around the world.
The Toro Company products by market
We strive to be a leader in adapting advanced technologies to products and services that provide innovative solutions for turf care maintenance, landscapes, agricultural fields, rental, specialty and underground construction, snow and ice management, and residential demands. The following is a summary of our products, by market, for our Professional segment and our products for our Residential segment:
Professional Segment
We design professional turf; landscape and lighting; rental, specialty and underground construction; snow and ice management; and agricultural products and market them worldwide through a network of distributors and dealers, as well as directly to government customers, rental companies, and large retailers. These channel partners then sell or rent our products primarily to professional users engaged in maintaining turf, such as golf courses, sports fields, municipal properties, as well as residential and commercial landscapes; installing, repairing, and replacing underground pipe and utilities; managing snow and ice needs; irrigating turf and agricultural fields; and creating, renovating, and illuminating landscapes
Residential Segment
We market our Residential segment products to homeowners through a variety of distribution channels, including outdoor power equipment distributors and dealers, mass retailers, hardware retailers, home centers, as well as online (direct to end-users). We also license our trademark on certain home solutions products as a means of expanding our brand presence.
Professional Segment
We design professional turf; landscape and lighting; rental, specialty and underground construction; snow and ice management; and agricultural products and market them worldwide through a network of distributors and dealers, as well as directly to government customers, rental companies, and large retailers. These channel partners then sell or rent our products primarily to professional users engaged in maintaining turf, such as golf courses, sports fields, municipal properties, as well as residential and commercial landscapes; installing, repairing, and replacing underground pipe and utilities; managing snow and ice needs; irrigating turf and agricultural fields; and creating, renovating, and illuminating landscapes
Residential Segment
We market our Residential segment products to homeowners through a variety of distribution channels, including outdoor power equipment distributors and dealers, mass retailers, hardware retailers, home centers, as well as online (direct to end-users). We also license our trademark on certain home solutions products as a means of expanding our brand presence.
International Operations and Business Segments
We currently manufacture our products in the U.S., Mexico, Australia, the United Kingdom, Italy, Romania, Germany, Poland, and China for sale throughout the world. We maintain sales offices in the U.S., Belgium, the United Kingdom, Australia, Japan, China, Italy, Poland, Germany, Spain, and France. New product development is pursued primarily in the U.S. with the intention of global distribution. Our net sales outside the U.S. were 23.1 percent, 24.6 percent, and 24.4 percent of total consolidated net sales for fiscal 2019, 2018, and 2017, respectively. As a result of our international operations, we are exposed to foreign currency exchange rate risk arising from transactions in the normal course of business
Engineering and Research of The Toro Company
We are committed to an ongoing engineering program dedicated to developing innovative new products and improvements in the quality and performance of existing products. However, a focus on innovation also carries certain risks that new technology could be slow to be accepted or not accepted by the marketplace. We attempt to mitigate these risks through our focus on, and commitment to, understanding our customers' needs and requirements. We invest time up front with customers, using "Voice of the Customer" tools, to help us develop innovative products that are intended to meet or exceed customer expectations. We use Design for Manufacturing and Assembly ("DFM/A") tools to ensure early manufacturing involvement in new product designs intended to reduce production costs. DFM/A focuses on reducing the number of parts required to assemble new products, as well as designing products to move more efficiently through the manufacturing process. We strive to make improvements to our new product development system as part of our continuing focus on Lean methods to shorten development time and reduce costs, while also improving quality
Manufacturing and Production of The Toro Company
In addition to most final assembly, we have strategically identified specific core manufacturing competencies for vertical integration, such as injection molding, extrusion, welding, stamping, fabrication, laser cutting, painting, machining, and aluminum die casting, and have chosen outside vendors to provide other services, where applicable. We design component parts in cooperation with our vendors, contract with them for the development of tooling, and subsequently enter into agreements with such vendors to purchase component parts manufactured using the tooling. We also have some agreements with third-party manufacturers to manufacture certain products on our behalf. In addition, our vendors regularly test new technologies to be applied in the design and production of component parts. Manufacturing operations include robotic and computer-automated equipment intended to speed production, reduce costs, and improve the quality, fit, and finish of our products. Operations are also designed to be flexible enough to accommodate product design changes that are necessary to respond to market conditions and changing customer requirements. In order to utilize our manufacturing facilities and technology more efficiently and effectively, we pursue continuous improvements in our manufacturing processes with the use of Lean methods that are intended to streamline work and eliminate waste. We spend considerable effort to reduce manufacturing costs through Lean methods and process improvement, product and platform design, application of advanced technologies, enhanced environmental management systems, safety improvements, and improved supply-chain management. Our Professional segment products are manufactured throughout the year. Our Residential segment lawn and garden products are also generally manufactured throughout the year.
However, our Residential segment snow thrower products are manufactured in the summer and fall months but may be extended into the winter months, depending upon demand. Our products are tested in conditions and locations similar to those in which they are intended to be used. We use computer-aided design and manufacturing systems to shorten the time between initial concept and final production. DFM/A principles are used throughout the product development process to optimize product quality and reduce cost. Our production levels and inventory management goals are based on estimates of wholesale and retail demand for our products, taking into account production capacity, labor availability, timing of shipments, and field inventory levels. Our production system utilizes Kanban, supplier pull, and build-toorder methodologies in our manufacturing facilities, as appropriate, for the business units they support in order to better align the production of our products to meet customer demand. We believe this has resulted in improved service levels for our participating suppliers, distributors, dealers, and other channels. We periodically shut down production at our manufacturing facilities in order to allow for maintenance, rearrangement, capital equipment installation, seasonality, and as needed, to adjust for market demand and facility renovation projects
However, our Residential segment snow thrower products are manufactured in the summer and fall months but may be extended into the winter months, depending upon demand. Our products are tested in conditions and locations similar to those in which they are intended to be used. We use computer-aided design and manufacturing systems to shorten the time between initial concept and final production. DFM/A principles are used throughout the product development process to optimize product quality and reduce cost. Our production levels and inventory management goals are based on estimates of wholesale and retail demand for our products, taking into account production capacity, labor availability, timing of shipments, and field inventory levels. Our production system utilizes Kanban, supplier pull, and build-toorder methodologies in our manufacturing facilities, as appropriate, for the business units they support in order to better align the production of our products to meet customer demand. We believe this has resulted in improved service levels for our participating suppliers, distributors, dealers, and other channels. We periodically shut down production at our manufacturing facilities in order to allow for maintenance, rearrangement, capital equipment installation, seasonality, and as needed, to adjust for market demand and facility renovation projects
Seasonality of The Toro Company earnings
Shipments of our Residential segment products, which accounted for 21.1 percent of total consolidated net sales in fiscal 2019, are seasonal, with shipments of lawn and garden products occurring primarily between February and June, depending upon seasonal weather conditions and demand for our products. Shipments of snow thrower products occur primarily between July and January, depending upon preseason demand, in-season snowfalls, and product availability. Opposite seasons in global markets in which we sell our Residential products somewhat moderate this seasonality of our Residential segment product sales.
Seasonality of Professional segment product sales also exists, but is tempered because the selling season in the Southern U.S. and our markets in the Southern hemisphere continue for a longer portion of the year than in Northern regions of the world. Our BOSS snow and ice management business offers a portfolio of counter-seasonal products in our Professional segment with our shipments of snow and ice management equipment occurring primarily between April and December, which can result in variability of shipment volumes depending upon preseason demand, in-season snowfalls, and product availability. Additionally, CMW has historically been less seasonal than certain of our Professional segment businesses primarily due to its strong presence in the Southern U.S. markets and the inherent nature of the underground construction market being less impacted by seasonal factors.
Overall, our worldwide shipment volumes are historically the highest in our fiscal second quarter and retail demand is generally highest in our fiscal third quarter. Typically, our accounts receivable balances increase between January and April as a result of higher shipment volumes and extended payment terms made available to our customers. Accounts receivable balances typically decrease between May and December when payments are received. Our financing requirements are subject to variations due to seasonal changes in working capital levels, which typically increase in the first half of our fiscal year and decrease in the second half of our fiscal year. Seasonal cash requirements of our business are 9 financed from a combination of cash flows from operations, cash on hand, and borrowings under our revolving credit facility, as applicable.
Seasonality of Professional segment product sales also exists, but is tempered because the selling season in the Southern U.S. and our markets in the Southern hemisphere continue for a longer portion of the year than in Northern regions of the world. Our BOSS snow and ice management business offers a portfolio of counter-seasonal products in our Professional segment with our shipments of snow and ice management equipment occurring primarily between April and December, which can result in variability of shipment volumes depending upon preseason demand, in-season snowfalls, and product availability. Additionally, CMW has historically been less seasonal than certain of our Professional segment businesses primarily due to its strong presence in the Southern U.S. markets and the inherent nature of the underground construction market being less impacted by seasonal factors.
Overall, our worldwide shipment volumes are historically the highest in our fiscal second quarter and retail demand is generally highest in our fiscal third quarter. Typically, our accounts receivable balances increase between January and April as a result of higher shipment volumes and extended payment terms made available to our customers. Accounts receivable balances typically decrease between May and December when payments are received. Our financing requirements are subject to variations due to seasonal changes in working capital levels, which typically increase in the first half of our fiscal year and decrease in the second half of our fiscal year. Seasonal cash requirements of our business are 9 financed from a combination of cash flows from operations, cash on hand, and borrowings under our revolving credit facility, as applicable.
Distribution and Marketing of The Toro Company products
We market the majority of our products through 68 domestic and 140 international distributors, as well as a large number of equipment dealers, irrigation dealers and distributors, mass retailers, hardware retailers, home centers, and online (direct to end-users) in more than 129 countries worldwide. Our distribution systems are intended to assure quality of sales and market presence, as well as to provide effective after-purchase service and support. Professional segment products are sold to distributors and dealers primarily for resale to golf courses, sports fields, industrial facilities, contractors, and government customers, and in some markets for resale to dealers. We sell some Professional segment products directly to government customers and municipalities, rental companies, and agricultural irrigation dealers, as well as to end-users in certain international markets.
Select irrigation and lighting products are sold to professional irrigation and lighting distributors and dealers, and certain professional-grade retail irrigation products are sold to home centers. Products for the rental and specialty construction and underground construction markets are sold to dealers and rental companies. Landscape contractor turf products are also sold to dealers in certain regions of North America. Snow and ice management products are primarily sold to distributors and dealers for resale to contractors. Residential segment products, such as walk power mowers, zero-turn radius riding mowers, and snow throwers, are generally sold to home centers, mass retailers, dealers, hardware retailers, as well as online (direct to end-users). In certain markets, these same products are sold to distributors for resale to hardware retailers and dealers. Home solutions products are primarily sold to home centers, mass retailers, and hardware retailers.
Internationally, Residential segment products are sold to dealers and mass merchandisers in Australia, Canada, and select countries in Europe. In most other countries, Residential segment products are mainly sold to distributors for resale to dealers and mass retailers. On November 30, 2018, during the first quarter of fiscal 2019, we completed our acquisition of a Northeastern U.S. distribution company, refer to Note 2, Business Combinations. During fiscal 2017 and 2018, we owned one wholly-owned domestic distribution company. Our primary purpose in owning domestic distributorships is to improve operations and test and deploy new strategies and business practices that could be replicated by our independent distributors, as well as facilitating ownership transfers.
Our current marketing strategy is to maintain distinct brands and brand identification for Toro, eXmark, BOSS, Ditch Witch, American Augers, Trencor, Subsite, HammerHead, Radius, Unique Lighting Systems, Rain Master, Pope, PERROT, Hayter, and Lawn-Boy products. 10 Across our brands, we market our Professional segment and Residential segment products during the appropriate season through multiple channels, including digital and online media, radio, print, direct mail, email, television, and social media. Most of our advertising and marketing efforts emphasize our brands, products, features, and other valuable trademarks. Advertising is purchased by us, through our agency partners, as well as through cooperative programs with distributors, dealers, and retailers
Select irrigation and lighting products are sold to professional irrigation and lighting distributors and dealers, and certain professional-grade retail irrigation products are sold to home centers. Products for the rental and specialty construction and underground construction markets are sold to dealers and rental companies. Landscape contractor turf products are also sold to dealers in certain regions of North America. Snow and ice management products are primarily sold to distributors and dealers for resale to contractors. Residential segment products, such as walk power mowers, zero-turn radius riding mowers, and snow throwers, are generally sold to home centers, mass retailers, dealers, hardware retailers, as well as online (direct to end-users). In certain markets, these same products are sold to distributors for resale to hardware retailers and dealers. Home solutions products are primarily sold to home centers, mass retailers, and hardware retailers.
Internationally, Residential segment products are sold to dealers and mass merchandisers in Australia, Canada, and select countries in Europe. In most other countries, Residential segment products are mainly sold to distributors for resale to dealers and mass retailers. On November 30, 2018, during the first quarter of fiscal 2019, we completed our acquisition of a Northeastern U.S. distribution company, refer to Note 2, Business Combinations. During fiscal 2017 and 2018, we owned one wholly-owned domestic distribution company. Our primary purpose in owning domestic distributorships is to improve operations and test and deploy new strategies and business practices that could be replicated by our independent distributors, as well as facilitating ownership transfers.
Our current marketing strategy is to maintain distinct brands and brand identification for Toro, eXmark, BOSS, Ditch Witch, American Augers, Trencor, Subsite, HammerHead, Radius, Unique Lighting Systems, Rain Master, Pope, PERROT, Hayter, and Lawn-Boy products. 10 Across our brands, we market our Professional segment and Residential segment products during the appropriate season through multiple channels, including digital and online media, radio, print, direct mail, email, television, and social media. Most of our advertising and marketing efforts emphasize our brands, products, features, and other valuable trademarks. Advertising is purchased by us, through our agency partners, as well as through cooperative programs with distributors, dealers, and retailers
Overview of The Toro Company's 4th quarter 2020 earnings report
FOURTH-QUARTER FISCAL 2020 FINANCIAL HIGHLIGHTS
FULL-YEAR FISCAL 2020 FINANCIAL HIGHLIGHTS
- Net sales of $841.0 million, up 14.5% from $734.4 million in the fourth quarter of fiscal 2019.
- Net earnings of $72.2 million, up 88.7% from $38.3 million in the fourth quarter of fiscal 2019; *Adjusted net earnings of $69.2 million, up 33.5% from $51.8 million in the fourth quarter of fiscal 2019.
- Reported EPS of $0.66 per diluted share, up 88.6% from $0.35 per diluted share in the fourth quarter of fiscal 2019; *Adjusted EPS of $0.64 per diluted share, up 33.3% from $0.48 per diluted share in the fourth quarter of fiscal 2019.
- As of October 31, 2020, the company had liquidity of about $1.1 billion.
FULL-YEAR FISCAL 2020 FINANCIAL HIGHLIGHTS
- Net sales of $3.38 billion, up 7.7% from $3.14 billion in fiscal 2019.
- Net earnings of $329.7 million, up 20.3% from $274.0 million in the prior-year period; *Adjusted net earnings of $327.7 million, up 1.1% from $324.3 million in fiscal 2019.
- Reported EPS of $3.03 per diluted share, up 19.8% from $2.53 per diluted share in fiscal 2019; *Adjusted EPS of $3.02 per diluted share, up 0.7% from $3.00 per diluted share in fiscal 2019.
- Returned $107.7 million to shareholders in dividends.
The Toro Company (TTC) stock price history over the last 5 years
The image below, obtained from Google shows the stock price history of The Toro Company for the last 5 years and it's been a pretty good time for Toro Company stockholders over the last 5 years. 5 years ago the stock was trading at $36.70 and its currently trading at $92.26. That's a very strong return of 156% provided to The Toro Company stockholders over the last 5 years.
The stock of Toro Company is trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of Toro Company's stock is very positive at this point in time.
The stock of Toro Company is trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of Toro Company's stock is very positive at this point in time.
Latest stock valuation of The Toro Company (TTC)
So what is The Toro Company stock worth based on their 4th quarter 2020 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for BrightView at $64.90 a stock.
We therefore believe the stock of The Toro Company is overvalued at its current price of $92.26
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $64.90, thus a good entry point into The Toro Company would be at $58.40 or below.
We expect the stock of The Toro Company to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued at its current price. Since the stock of Toro is trading at well above our suggested entry point we rate the stock of Toro as a sell
We therefore believe the stock of The Toro Company is overvalued at its current price of $92.26
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $64.90, thus a good entry point into The Toro Company would be at $58.40 or below.
We expect the stock of The Toro Company to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued at its current price. Since the stock of Toro is trading at well above our suggested entry point we rate the stock of Toro as a sell
Next earnings release
It is expected that The Toro Company will release their 1st quarter 2021 earnings report in early March 2021
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