Shares of outdoor maintenance equipment company The Toro Company(NYSE: TTC) popped on Wednesday after the company reported financial results for its fiscal fourth quarter of 2023. As of 11:30 a.m. ET, Toro stock was up 7%, but it has been up about 14% earlier in the trading session.
Toro's profits come in relatively strong
To be clear, Q4, which ended in October, wasn't necessarily great for Toro. Net sales dropped 16% year over year. Overstocked inventory and changes in consumer demand were the primary culprits here.
However, Toro's management already anticipated slow sales in Q4 and had made changes to boost profitability. On an adjusted basis, the company reported diluted earnings per share (EPS) of $0.71, which was down 36% year over year. But management had guided for a slightly larger drop. Therefore, its Q4 profit results looked relatively strong by comparison.
Moving beyond the headwinds?
Toro is going into an important new partnership with Lowe's that launches in early 2024. This is one of the biggest retail deals the company could have scored at this stage of its business. It's exciting to think what this could do for revenue growth.
That said, Toro's management is managing expectations with the fiscal 2024 guidance it issued today. The company only expects to see net sales increase by a single-digit percentage point, which suggests the benefits of the Lowe's partnership isn't expected to be immediate. And full-year adjusted EPS is expected to come in at $4.25 per share to $4.35 per share, which is only a modest year-over-year jump.
Toro might not grow by leaps and bounds in 2024, but results should be strong and profits higher than this year, which should be reassuring to shareholders.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool recommends Lowe's Companies and Toro. The Motley Fool has a disclosure policy.
