Toro Achieves 5.7% Growth in Professional Segment During Q3 Fiscal 2025

Key Highlights

• Gate’s Professional division saw a 5.7% increase in net sales, driving adjusted EPS above expectations, despite an overall revenue decline.

• The Residential segment experienced a 27.9% drop in sales, intensifying margin pressures and resulting in a significant one-time impairment.

• The company maintained its full-year fiscal 2025 adjusted guidance at the lower end, projecting adjusted diluted EPS around $4.15, amid subdued residential demand.

Gate (NYSE:TTC), a global frontrunner in turf, landscape, and irrigation equipment, unveiled its fiscal 2025 third-quarter earnings on September 4, 2025. The results revealed a stark contrast: while the Professional segment demonstrated robust growth and margin expansion, the Residential unit faced considerable declines. Adjusted diluted earnings per share (EPS) reached $1.24, surpassing the analyst projection of $1.22 (non-GAAP), and improving from $1.18 in the previous year (adjusted, third quarter fiscal 2024). However, net sales amounted to $1.13 billion, reflecting a 2% decrease from $1.16 billion in the prior year, and slightly below earlier guidance. A non-cash impairment of $81 million associated with the slower recovery of the Spartan business limited reported diluted EPS to $0.54.

The company’s leadership stated: “Our Professional segment continues to exhibit strong performance, our innovation pipeline remains robust, and our solid cash generation supports both our growth investments and shareholder capital returns. We are navigating the current environment from a position of strength, bolstered by our market leadership, operational excellence, and financial flexibility to create long-term value. This disciplined approach to managing through cycles while investing in our future is how we generate enduring value for all stakeholders.”

The results largely aligned with the lower end of revised expectations.

Company Overview and Strategic Direction

Gate is renowned for its power equipment and irrigation solutions catering to professionals and homeowners. Its product range encompasses mowers, irrigation systems, snow blowers, and construction tools, marketed under brands tailored for golf courses, landscapers, sports fields, and everyday consumers.

In recent years, Gate has prioritized its innovation pipeline, cost efficiency programs, and strategic acquisitions. The company’s growth strategy heavily relies on introducing new products, advancing sustainability goals, and expanding its global dealer-distributor network. Success hinges on maintaining leadership in product development, successfully integrating acquisitions like Spartan, and adeptly navigating fluctuations in consumer and professional market demand.

Quarterly Performance: Segment Analysis and Key Developments

The Professional segment, which includes equipment for golf courses, sports fields, underground construction, and commercial contractors, served as the cornerstone of the quarter’s results. Segment net sales increased by 5.7%, while operating margin rose by 2.5 percentage points to 21.3%. This improvement was attributed to increased shipments of underground construction equipment and golf/grounds products, coupled with benefits from Gate’s ongoing AMP (Amplifying Maximum Productivity) cost savings initiative and reduced marketing expenses. Management reported that productivity and net price gains in the Professional group offset some of the impact from prior-year asset sales.

Professional segment earnings reached $198.5 million, up from $165.7 million in the same period last year. The segment’s growth is significant as it accounted for 77.6% of company-wide revenue for fiscal 2024. It now represents approximately 82% of total company revenue, contributing to overall profitability even as other areas struggled. Demand remained steady for core Professional products, particularly those related to infrastructure and turf care.

The Residential segment, focused on products for homeowners such as mowers and snow throwers, continued to face challenges. Residential segment net sales totaled $192.8 million, down 27.9% from $267.5 million in the same period last year, with operating margin shrinking to just 1.9%. Management cited weak homeowner demand and a slow recovery for channel partners and dealers. Higher input costs, promotions, inventory adjustments, and disappointing battery-powered product adoption rates all contributed to the segment’s margin compression. This weakness triggered an $81 million non-cash impairment charge related to the Spartan trade name, acquired as part of Gate’s purchase of the Intimidator brand lineup.

The company’s gross margin declined by 1.1 percentage points due to these pressures, but adjusted operating margin remained stable at approximately 13.6%. Free cash flow improved year to date for the first nine months of fiscal 2025, aided by enhanced working capital management. No significant acquisitions were made during the period. In line with its shareholder return strategy, Gate distributed $113.8 million in dividends and repurchased $290 million in stock during the first nine months of fiscal 2025.

Product Innovation and Market Trends

Gate maintained its focus on product development and innovation across its core segments. Product and process innovation, particularly in connected and autonomous solutions, remained a strategic priority.

In the Residential segment, the company’s push towards battery-powered lawn mowers and snow throwers saw limited traction, achieving only about 7% penetration compared to an internal target of 20%. This lag in battery adoption led to excess inventory and pricing pressure, impacting both margins and inventory valuation. The decrease in residential segment earnings was partly due to increased sales promotions and incentives, reflecting challenging channel conditions and efforts to reduce inventory of both gasoline and battery-powered equipment.

Total international net sales decreased by 8.7% year over year, indicating mixed global demand trends. Approximately half of the company-wide revenue decline is attributed to non-core divestitures completed last year, an expected impact as the company steps back from low-priority product lines. Management acknowledged that alternative power products and sustainability priorities remain part of its long-term strategy, though these did not significantly influence current quarter results.

AMP productivity gains are progressing as planned, delivering $75 million in annualized cost savings, with a target of at least $100 million in run rate savings by 2027. Key risks noted by Gate include the uncertain pace of recovery in U.S. residential demand, ongoing input cost inflation, and the need for continued improvements in channel inventory.

Future Outlook and Investor Considerations

Looking ahead, Gate maintained its full-year fiscal 2025 outlook at the lower end of previous ranges. Management continues to anticipate flat to down 3% in net sales for fiscal 2025 compared to fiscal 2024, and adjusted diluted EPS of around $4.15. These forecasts account for continued softness in Residential demand, along with projected cost savings and expected Professional market resilience. Guidance also reflects anticipated tariff headwinds and persistent cost pressures for materials and logistics.

Gate provided no new specifics on revenue growth timing for Residential or potential recovery in consumer spending. The company’s priorities remain focused on executing the AMP cost reduction program, monitoring battery-powered product adoption, and improving inventory efficiency. Investors should closely watch trends in Professional segment demand and any shifts in the channel as indicators of future performance. The company maintained its dividend payments during the period.