The Toro Company reported net earnings of $87.1 million, or $1.51 per share, on a net sales increase of 5.8 percent to $745 million for its fiscal 2014 second quarter ended May 2, 2014. In 2Q 2013, the company delivered net earnings of $78.4 million, or $1.32 per share, on net sales of $704.5 million.
For the first six months, Toro reported net earnings of $113 million, or $1.95 per share, on a net sales increase of 3.6 percent to $1.191 billion. In the comparable fiscal 2013 period, the company posted net earnings of $109.8 million, or $1.85 per share, on net sales of $1.149 billion. Strong retail demand for snow products and landscape maintenance equipment, as well as contributions from its micro irrigation, construction and rental businesses, helped the company to surpass sales and earnings earned in 2Q 2013, which benefited from the Tier 4 diesel engine transition.
“As we approach our Centennial and look ahead to the end of our Destination 2014 journey, we remain encouraged about both our business and prospects for achieving our goals,” said Michael J. Hoffman, Toro’s chairman and CEO. “Our portfolio of innovative products has us well-positioned to drive retail sales and strengthen our market share. We will keep a watchful eye on retail demand and field inventories across our businesses and make any necessary adjustments. In addition, we will benefit from increased pre-season snowthrower shipments, primarily in the fourth quarter, that are needed to replenish inventories diminished by strong customer demand last winter. As we strive to achieve our operating earnings goal, we will continue to pursue productivity improvements to leverage expenses and expand margins. While focused on things within our control, we remain mindful that Mother Nature may not deliver favorable summer growing conditions again this year or economic conditions may change, either of which could create potential challenges for our businesses and customers.”
The company continues to expect revenue growth for fiscal 2014 to be about 5 to 6 percent, and net earnings per share to be about $2.90 to $2.95. For the third quarter, the company expects net earnings per share to be about $0.82.
Professional segment net sales for the second quarter totaled $528.6 million, up 6.5 percent from 2Q 2013. Sales of landscape maintenance equipment increased on strong retail demand, including for the company’s zero turn radius mowers. Golf equipment and irrigation product sales were up due to channel optimism and demand for new product offerings. Global micro irrigation sales increased with continued demand for more efficient solutions for agriculture and construction and rental equipment sales grew on channel demand for Toro branded products.
Slightly offsetting these increases were lower sales of professional products in international markets. For the first six months, professional segment net sales were $824 million, essentially flat with the comparable fiscal 2013 period. Sales benefited from strong retail demand for landscape maintenance equipment and increased demand for micro irrigation, construction and rental products, but were offset by sales in the first quarter of last fiscal year that benefited from the Tier 4 diesel engine transition and were not repeated this year.
Professional segment earnings for the second quarter totaled $122.4 million, up 9 percent from 2Q 2013. For the first six months, professional segment earnings were $169.8 million, down 1.8 percent from 2Q 2013.
Residential segment net sales for the second quarter totaled $210.4 million, up 4.5 percent from 2Q 2013. Sales increased due to stronger domestic retail demand for residential zero turn mowing products, as customers continued to transition to this mowing platform. International demand for walk power mowers, as well as domestic demand for electric blowers and trimmers, also benefited sales for the quarter.
Offsetting these increases were lower shipments of domestic walk power mowers and decreased sales in Australia due to unfavorable currency exchange and weather conditions. For the first six months, residential segment net sales were $357.9 million, up 11 percent from the comparable fiscal 2013 period. Sales for the period increased on strong retail demand for snow products, primarily in the first quarter, due to significant snowfall across key North American markets, as well as increased channel and retail demand for residential zero turn mowing products and international demand for walk power mowers.
Residential segment earnings for the second quarter totaled $23.8 million, down 3.5 percent from 2Q 2013. For the first six months, residential segment earnings were $42 million, up 13.9 percent from the comparable fiscal 2013 period.
Gross margin for the second quarter was 35.5 percent, a decrease of 30 basis points compared to 2Q 2013, primarily due to higher commodity costs and unfavorable currency exchange rates, somewhat offset by realized pricing. For the first six months, gross margin was 35.9 percent, a decrease of 50 basis points, primarily due to higher commodity costs, segment mix and unfavorable currency exchange rates, somewhat offset by realized pricing.
Second quarter operating earnings as a percent of sales improved 90 basis points to 17.6 percent compared to the same fiscal 2013 period. For the first six months, operating earnings as a percentage of sales improved 10 basis points to 14.4 percent.