TTC Industrial Equipment · Outdoor equipment · Professional tools · Dividend payer · Thesis updated June 14, 2026

Toro is steadier after a tariff scare

The Professional segment is the main engine, with Q2 2026 sales of $1,106.6 million, up 9.1% year over year.
Residential improved in Q2, with sales of $310.4 million, up 4.4%, and management now expects full-year sales to be about flat.
Management raised fiscal 2026 guidance to 4% to 6.5% sales growth and adjusted EPS of $4.50 to $4.62.
The biggest recent relief is tariffs: a possible $20 million refund is expected to offset new tariff costs this year.
The harder question is next year, because Toro now faces a $120 million annual gross tariff run-rate to offset.

01 Running thesis

Better year, harder next test

Toro looks stronger than it did earlier in fiscal 2026. After a solid Q2, management raised its full-year outlook. It now expects 4% to 6.5% sales growth and adjusted EPS of $4.50 to $4.62.

The bull case starts with the Professional segment. Demand is still healthy in golf and grounds, landscape contractor, and especially underground and specialty construction. The Tornado acquisition also adds hydrovac excavation tools for underground construction, power, and energy markets.

Residential is no longer the same drag it was in fiscal 2025. Q2 2026 Residential sales rose 4.4%, and segment earnings margin improved to 9.8% from 5.4% a year earlier. Management now expects full-year Residential sales to be about flat.

The bear case has shifted. Tariffs are less scary for fiscal 2026 because a possible $20 million refund should offset new tariff costs. But the company still has a $120 million annual gross tariff run-rate going forward. Toro needs its AMP productivity program, sourcing changes, and pricing discipline to keep that from eating margins.

Jun 2026▲Q2 2026 results were stronger than expected, and management raised full-year guidance to 4% to 6.5% sales growth and adjusted EPS of $4.50 to $4.62. The tariff overhang eased because expected refunds should offset new tariff costs this year.

Jun 2026▲The Q2 2026 filing showed Professional sales up 9.1% and Residential sales up 4.4%. Residential margin also improved to 9.8% from 5.4%, which supports the recovery case.

Mar 2026▲After Q1 2026, management raised full-year sales and adjusted EPS guidance. The Residential outlook improved from a larger decline to flat to down 3%.

Mar 2026→The Q1 2026 filing confirmed the segment split: Professional sales rose 7.2%, while Residential sales fell 6.8%. A Supreme Court tariff ruling created possible relief, but the impact was still being evaluated.

Dec 2025▼Fiscal 2026 guidance included about $100 million of tariff headwinds, which raised margin risk. Professional strength remained clear, but Residential recovery expectations became more cautious.

Dec 2025→The fiscal 2025 filing showed Professional sales of $3,624.0 million and Residential sales of $858.4 million. The Tornado acquisition expanded underground construction exposure, while Residential weakness stayed a concern.

Sep 2025▼Q3 2025 showed a sharp split between segments. Professional sales rose about 6%, but Residential sales fell 28%, and management lowered expectations to the low end of prior guidance.

Sep 2025▼The Q3 2025 filing recorded an $81.1 million Spartan trade name impairment and showed Residential margin falling to 1.9%. That made the Residential downturn more serious than before.

02 Business model

Dealers, contractors, and lawns

Toro designs, makes, and sells equipment for turf care, irrigation, landscaping, snow and ice management, and underground construction. It sells through distributors, dealers, mass retailers, hardware stores, rental centers, and direct-to-consumer channels, including online.

The best part of the model is the Professional customer base. Golf courses, grounds crews, landscapers, rental shops, and construction crews need reliable equipment, parts, and service. That can make demand steadier than one-time consumer lawn mower purchases.

The weaker part is that many products still depend on weather, housing, consumer spending, and dealer inventory. A dry summer can hurt turf and irrigation demand. A cautious consumer can delay a mower purchase. Lean channel inventories can help sales, but they can also strain factories if demand comes in faster than planned.

Toro also leans on innovation. Management has pointed to alternative power, smart connected features, and autonomous tools across residential, commercial, and golf applications. These products can help defend pricing, but they must prove they can sell at scale.

03 Product portfolio

What Toro sells

Cash cow

Professional turf equipment

This includes equipment for golf courses, sports fields, campuses, and grounds crews. It is a core part of the Professional segment and supports recurring parts and service demand.

Growth engine

Underground and specialty construction

This area posted low double digit organic sales growth in Q2 2026, according to management. The Tornado deal broadened Toro into hydrovac excavation solutions.

Growth engine

Landscape contractor equipment

These products serve professional landscapers who need durable mowing and jobsite tools. Management cited high single digit sales growth in landscape contractor during Q2 2026.

Steady

Irrigation and lighting

Toro sells turf and agricultural irrigation systems, plus landscaping and lighting products. Demand can be tied to weather, water use, and outdoor project spending.

Steady

Snow and ice management

This includes equipment for clearing snow and managing ice. Sales can swing with winter weather, but the category gives Toro exposure beyond lawn and turf seasons.

Option

Residential yard and snow products

Residential was weak in fiscal 2025, but Q2 2026 showed signs of recovery. The key test is whether this business can return to growth in fiscal 2027.

Option

Autonomous and connected products

Toro is pushing products such as Toro Haven, Exmark Turf Tracer with XiQ, and GeoLink Solutions Autonomous Fairway mower. These could support future growth if customers accept the price and performance.

04 Business segments

Professional carries the mix

Professional78%modest

Residential22%flat

Segment shares use Q2 fiscal 2026 net sales: Professional was $1,106.6 million and Residential was $310.4 million. This is a quarterly mix, so it can move with seasonality and weather.

05 Risk factors

What could go wrong

Tariff savings fall short

High impact · Medium odds

Fiscal 2026 tariff pressure looks mostly offset by a possible $20 million refund. The bigger issue is the $120 million annual gross tariff run-rate after this year. If AMP savings, sourcing changes, or pricing do not cover that cost, margins could slip.

We watchTrack updates on the AMP run-rate target, gross tariff run-rate, sourcing changes, and adjusted gross margin.

Residential recovery fades

Medium impact · Medium odds

Residential sales improved in Q2 2026, but the segment is still sensitive to consumer confidence and big-ticket home spending. Fiscal 2025 showed how quickly this business can weaken, with Residential sales down 14.0% for the year. If consumers pull back again, the about-flat outlook may not hold.

We watchWatch Residential quarterly sales growth, Residential earnings margin, retail sell-through, and management's fiscal 2027 outlook.

Underground demand proves temporary

Medium impact · Medium odds

Underground and specialty construction is a key growth area, helped by demand tied to infrastructure work such as fiber projects. The open question is how much of that demand depends on stimulus or project timing. A slowdown would weaken the main growth story inside Professional.

We watchWatch organic growth in underground and specialty construction, backlog comments, and management's view of project visibility.

Weather hurts second-half demand

Medium impact · Medium odds

Toro sells products tied to grass growth, irrigation, landscaping, and snow. Management noted possible drought conditions in some key markets. Dry weather can reduce lawn and turf activity, while weak snowfall can hurt snow equipment demand.

We watchMonitor drought conditions, snowfall patterns, and management comments on field inventory and dealer orders.

Lean inventories create cost pressure

Low impact · Medium odds

Lower channel inventories can be good because dealers may need to reorder. But if inventories are too lean and demand rises quickly, Toro may need higher-cost production or freight to meet orders. That could cap some of the margin benefit from better sales.

We watchWatch lead times, field inventory comments, freight costs, and manufacturing cost commentary.

06 Quick answers

In one breath

What does The Toro Company do?

Toro makes outdoor equipment for professional and residential users. Its products cover turf care, irrigation, landscaping, snow and ice management, and underground construction.

Why is the Professional segment important for Toro?

Professional is the larger and stronger segment. In Q2 fiscal 2026, it produced $1,106.6 million of net sales, compared with $310.4 million for Residential.

Is Toro still hurt by tariffs?

For fiscal 2026, management expects the net impact to be negligible because a possible $20 million refund should offset new tariff costs. The longer-term issue is the $120 million annual gross tariff run-rate that still needs to be offset.

What should investors watch next?

The main items are Professional growth, Residential stability, and AMP productivity savings. Investors should also watch whether underground construction demand stays strong and whether weather hurts turf, irrigation, or snow demand.