Toro finds its stride as tariff fears begin fading
- Toro posted a strong third quarter in 2026, with both segments growing sales over 8 percent.
- Management raised full-year adjusted EPS guidance to a range of $4.60 to $4.65.
- The company expects to exceed its $125 million AMP savings target by the end of the year.
- Tariffs are no longer expected to be a meaningful headwind in fiscal 2027.
A stronger base for the next fiscal year
Toro looks increasingly steady after a strong third quarter in fiscal 2026. With both the Professional and Residential segments growing sales over 8 percent, management raised its full-year adjusted EPS guidance to a range of $4.60 to $4.65.
The bull case centers on operational execution. The Professional segment continues to see strength in underground construction and landscape contractors. The Residential segment is showing real progress on profitability, expanding its operating margin by 400 basis points year-over-year. The company is also on track to beat its $125 million AMP savings target, and year-to-date free cash flow conversion sits at an impressive 128 percent.
The bear case has improved but still requires attention. Management has downplayed the tariff overhang for fiscal 2027, stating that productivity gains and sourcing changes should offset the costs. However, delivering those required offsets demands perfect execution. The company also booked a $43.1 million non-cash impairment charge in the third quarter for a factory closure and mower platform exit, highlighting ongoing network rationalization costs. Residential growth remains sensitive to winter snowfall and consumer confidence, which could threaten the goal of sustainable double-digit margins.
Dealers, contractors, and lawns
Toro designs, makes, and sells equipment for turf care, irrigation, landscaping, snow and ice management, and underground construction. It sells through distributors, dealers, mass retailers, hardware stores, rental centers, and direct-to-consumer channels.
The best part of the model is the Professional customer base. Golf courses, grounds crews, landscapers, rental shops, and construction crews need reliable equipment, parts, and service. That can make demand steadier than one-time consumer lawn mower purchases.
The weaker part is that many products still depend on weather, housing, consumer spending, and dealer inventory. A dry summer can hurt turf and irrigation demand, while a mild winter can hurt snow equipment sales. Lean channel inventories can help future sales, but they can also strain factories if demand comes in faster than planned.
Toro also leans on innovation to drive growth. Management focuses on alternative power, smart connected features, and autonomous tools across residential, commercial, and golf applications. These products can help defend pricing, provided customers accept the new technology.
What Toro sells
Professional turf equipment
This includes equipment for golf courses, sports fields, campuses, and grounds crews. It is a core part of the Professional segment and supports recurring parts and service demand.
Underground and specialty construction
This area continues to perform well, helped by infrastructure work. The Tornado acquisition broadened Toro into hydrovac excavation solutions.
Landscape contractor equipment
These products serve professional landscapers who need durable mowing and jobsite tools. The segment remains a reliable driver of professional sales.
Irrigation and lighting
Toro sells turf and agricultural irrigation systems, plus landscaping and lighting products. Demand can be tied to weather, water use, and outdoor project spending.
Snow and ice management
This includes equipment for clearing snow and managing ice. Sales can swing with winter weather, giving Toro exposure outside of traditional spring and summer seasons.
Residential yard and snow products
Residential saw significant margin improvement in the third quarter of 2026. The key test is whether the segment can hit sustainable double-digit margins.
Autonomous and connected products
Toro is pushing products such as Toro Haven and the GeoLink Solutions Autonomous Fairway mower. These could support future growth if they sell at scale.
Professional carries the mix
Segment shares use the second quarter of fiscal 2026 net sales, which were $1,106.6 million for Professional and $310.4 million for Residential. This mix shifts with seasonal demand.
What could go wrong
Productivity offsets miss the mark
High impact · Medium oddsManagement believes tariffs will not be a meaningful headwind in fiscal 2027 because productivity gains and sourcing changes will cover the costs. If those savings fall short, margins could slip quickly.
Residential recovery slows down
Medium impact · Medium oddsResidential sales grew over 8 percent in the third quarter of 2026, and margins expanded. However, the segment is still highly sensitive to consumer confidence and big-ticket home spending. If consumers pull back, the margin targets may be out of reach.
Weather hurts demand
Medium impact · Medium oddsToro sells products tied to grass growth, irrigation, landscaping, and snow. Dry weather can reduce lawn and turf activity, while weak snowfall can hurt snow equipment demand.
Underground demand cools off
Medium impact · Low oddsUnderground and specialty construction is a key growth area for Toro. If infrastructure spending slows or project delays occur, this critical piece of the Professional segment could weaken.
In one breath
What does The Toro Company do?
Toro makes outdoor equipment for professional and residential users. Its products cover turf care, irrigation, landscaping, snow and ice management, and underground construction.
Why is the Professional segment important for Toro?
Professional is the larger and more profitable segment. It serves golf courses, landscapers, and contractors, providing steadier demand and higher margins than residential sales.
Is Toro still hurt by tariffs?
The risk is fading. Management indicated in the third quarter of 2026 that ongoing productivity gains and sourcing changes should prevent tariffs from being a meaningful headwind in fiscal 2027.
What should investors watch next?
Key items are the successor to the AMP productivity program, the sustainability of Residential margin gains, and whether winter weather supports snow equipment sales.
Sources and research notes
This page combines Finn's company research with public filings and other cited materials. The thesis is reviewed when material company information changes; Finn Scores use the latest available scoring data.
- Thesis reviewed
- September 13, 2026
- Score data
- September 27, 2026
- Reviewed by
- Shivam Bharuka
Comparable Tools & Accessories companies
Companies near The Toro Company in Finn's Tools & Accessories industry ranking.
