Bearish stock to watch: Toro Co (NYSE: TTC)

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Toro Co (NYSE: TTC) stock fell 6.35% on December 18th, 2019 (Source: Google finance) after the company’s net income for the quarter slipped to $38.3 million from $39.0 million, in the year-ago period. The company has reported fourth quarter operating earnings as a percent of sales of 5.9% compared with 8% a year ago. For the quarter, adjusted operating earnings as a percent of sales were 8.4%. TTC has ended the fourth quarter with $151.8 million of cash and cash equivalents and $700.8 million of debt.

Meanwhile, in 2019, the company has completed the Charles Machine Works acquisition, invested more than $200 million in R&D and capital expenditures, repurchased $20 million of Toro stock and paid $96 million in dividends.

TTC in the fourth quarter of FY 19 has reported the adjusted earnings per share of 48 cents, beating the analysts’ estimates for the adjusted earnings per share of 46 cents, according to the FactSet consensus. The company had reported the adjusted revenue growth of 36.2 percent to $734.4 million in the fourth quarter of FY 19, missing the analysts’ estimates for revenue of $745 million. For the fourth quarter, revenue increased to $734.4 million, mainly due to the Charles Machine Works acquisition, BOSS product sales and channel demand for new golf product introductions in the quarter. For the fourth quarter, Professional segment net sales increased 46.9% to $588.2 million. The sales growth was mainly due to the acquisition of Charles Machine Works, which added incremental sales of $194.7 million for the quarter. For the fourth quarter, Residential segment net sales rose 1.9% to $135.7 million, mainly due to strong sales of snow thrower products. Residential segment earnings for the fourth quarter grew 104.7% to $13.9 million, mainly on the back of pricing and productivity initiative. Adjusted gross margin expanded 130 basis points to 34.5% in the fourth quarter.

For fiscal 2020, the company expects sales to be of about $3.6 billion and adjusted earnings per share to be in the range of $3.33 to $3.40, compared with the FactSet consensus for revenue of $3.62 billion and earnings per share of $3.35. For fiscal 2020, the company expects net other income to be about $13 million, which is about 50% lower than fiscal 2019. The main driver of this decrease is the realized gain on the actuarial valuation changes in fiscal 2019, which is not anticipated to repeat in fiscal 2020. For fiscal 2020, the company expects an adjusted effective tax rate to be of about 20.5%.

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