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Here's Why Shares of The Toro Company Climbed 12% in September

By Scott Levine – Oct 8, 2020 at 5:28PM

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To the delight of investors, the company beat analysts' expectations on the top and bottom lines -- but that wasn't all.

What happened

Extending their 6% rise in August, shares of The Toro Company (TTC -0.36%) rose 12% in September, according to data from S&P Global Market Intelligence. In addition to rejoicing at the company's third-quarter earnings report, investors also responded favorably to the news of positive sentiment regarding the stock from Wall Street.

So what

Beating analysts' consensus revenue estimate of $773 million, The Toro Company reported sales of $841 million for Q3 2020. While the company reported an 8% year-over-year decrease in sales from its professional segment, the residential segment reported sales of $205 million, representing a 38% increase over the same period in 2019.

A man holds a table which projects a hologram of a rising financial chart.

Image source: Getty Images.

In addition to the top line of the income statement pleasantly surprising investors, the company handily beat expectations on the bottom line as well. Whereas the consensus estimate among analysts was for the company to report earnings of $0.55 per share, The Toro Company reported adjusted earnings per share of $0.82.

Further cause for celebration was also found on the cash flow statement, as the company reported $235 million in operational cash flow -- a 147% increase over the $95 million it reported in Q3 2019.

Following the company's strong Q3 performance, Timothy Wojs, an analyst at Baird, upgraded the stock to outperform from neutral and raised his price target to $88 from $80, according to Moreover, Wojs recognized "improving end-user demand coupled with restocking and pent-up equipment purchases, which could result in accelerating revenue and earnings growth in 2021."

Reassuring news also came in the middle of the month, when the company announced it had declared its regular quarterly dividend of $0.25 per share, payable on Oct. 9.

Now what

While the company reported a strong Q3 performance, it's worth remembering that it had withdrawn 2020 guidance last March, and it has continued to refrain from forecasting what to expect for the remainder of the year. Therefore, it will be interesting to see how the company performs in the fourth quarter, and what management suggests investors can look for in 2021.

Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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