The maker of lawn mowers and lawn-care equipment earned $2 per share in the quarter, up 24% from the $1.61 per share it earned in the same period last year. The earnings crushed the consensus estimate of $1.81 per share.
Sales, meanwhile, were also impressive, up 10.5% to $548 million. Perhaps the best news, though, was that Toro boosted its earnings expectations to growth of between 18% to 23% from the 14% to 18% range.
As pointed out back in February, Toro's earnings have hummed along nicely for the past several quarters. One key to Toro's strength has been its ability to contain costs in the face of rising commodity prices. Selling, general, and administrative costs, for example, amounted to 21.4% of sales versus 22.4% of sales in the second quarter of 2003. And the firm has committed itself to more cost-cutting to offset higher steel and aluminum prices.
Of course, robust sales have also helped. Toro cited newer products as a driver in this area. However, by the company's own admission, external factors, such as favorable weather and a stronger economy, also contributed to the healthy bottom line. Brisk home sales, especially by folks who are buying for the first time, also potentially have been a contributing factor. This raises the question of whether a rise in interest rates and a resultant deceleration in home sales could dampen Toro's prospects.
At the moment, Toro appears confident that it can keep up its run. That's likely to leave investors thinking the grass couldn't get much greener.
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Fool contributor Brian Gorman is a freelance writer living in Chicago, Ill. He does not own shares of any companies mentioned here.