Toro (NYSE:TTC), maker of lawn mowers and lawn-care accessories, has been riding high for a long time. With interest rates low and interest in maintaining homes and commercial properties high, the company's collection of lawn mowers, irrigation systems, and assorted lawn gear has been selling briskly. Even the company's name, Spanish for bull, offers a "count on it" sense of good tidings.
With hardly a matador in sight, Toro shares have nearly tripled over the past three years, and the fundamentals don't seem to be calling an end to the bull-run. This morning, the company reported $3.12 per share in earnings on $1.5 billion in net sales for fiscal 2003. It also issued guidance for the new year, calling for 10% to 12% in bottom-line gains on 7% to 9% growth in sales.
That the fiscal 2004 figures assume margin expansion is particularly impressive when one considers that it's stacked on top of this latest year's generous 5.5% net margins. That might not be the double-digit margins one associates with growth stocks, but it's awfully sweet among Toro's peers.
For example, Deere's (NYSE:DE) net margins, which have improved to Toro's levels over the past two quarters, clocked in at less than half that last year. Caterpillar's (NYSE:CAT) net margins have hovered around 4% for more than three years. While one can argue that Toro's products aren't as economically sensitive as fleets of Deere and Caterpillar machinery, Toro's strongest growth in fiscal 2003 actually came from its commercial gear.
If nothing else, the past few years of growth at Lowe's (NYSE:LOW) and to a lesser extent Home Depot (NYSE:HD) show that folks are hungry to improve their homes, inside and out. Toro has been riding that same bull. Its shareholders will be the first to tell you that it's been one heck of a ride.
Are you more concerned with the inside of your home than the outside? Have some tips to share on the proper care of your homestead? Stumped over what to do with a tree stump? Lawn gnomes: cool or corny? All this and more -- in the Building / Maintaining a Home discussion board. Only on Fool.com.
