Growing up on the Great Plains, you learn a few things about the weather -- namely, that if you depend on predictable and well-behaved weather for your livelihood, you're gonna have problems sooner or later.
Lawn and landscaping equipment company Toro (NYSE:TTC) has experienced two straight quarters of strange weather. The winter was unusually warm and dry, hurting sales of snow-removal equipment. Spring followed with unusually cold and wet weather, which hurt lawn-equipment sales.
Nevertheless, Toro managed to achieve nearly 15% revenue growth in the second quarter (more than 11% when stripping out the Hayter acquisition). Operating income climbed nearly 19%, and a lower share count led to 33% earnings-per-share growth.
Although domestic weather did Toro no favors, weather in the company's overseas markets was a bit more normal. This weather, combined with a weak dollar and the benefits of the Hayter acquisition (Hayter was a U.K.-based company), led international sales to climb over 41% in the quarter.
Performance in the residential group wasn't quite up to snuff because of the unusual weather. Sales were up 17%, but earnings climbed only about 9%. Although irrigation and riding mower sales were weak, there was some strength in walk power mowers. Unfortunately, mower sales are highly seasonal, and Toro management doesn't seem confident about recouping much of the business lost to weather in this quarter.
Professional sales were again strong in the quarter. Sales were up nearly 15% and earnings grew 18%. Volume was up across almost all categories, and the landscape and golf markets were strong. Unlike the residential business, the professional segment is a bit less weather-sensitive, and continues to be a source of strength for the company.
Looking ahead, Toro expects to stay active on the acquisition front -- particularly with strategic and attractively priced deals like the Hayter acquisition. While that could draw away funds from further share repurchases, management has thus far struck a reasonable balance between returning cash to shareholders and reinvesting in the business.
Of course, competitors like Deere (NYSE:DE), Honda (NYSE:HMC), and Electrolux's (NASDAQ:ELUXY) Husqvarna aren't going to disappear. What's more, Toro management didn't exactly produce the sort of forward guidance that investors wanted to hear (particularly with respect to reorder rates and third-quarter performance).
I like the company and I absolutely regret not buying these shares back in early 2002, when I first started digging into the story. But that doesn't mean that they're necessarily still a great buy. In fact, I'd say the shares are pretty much fairly valued at this point, but a quick look at the chart shows that Toro has mowed through skepticism before.
Keep digging for more Foolish Takes:
- Is Deere diverging?
- Bad weather has rained on Home Depot and Lowe's, too.
- Toro has mowed over the bears in the past.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
