Toro Co (NYSE:TTC) stock fell 1.17% (As on December 18, 11:22:55 AM UTC-4, Source: Google Finance) after the company exceeded market expectations for the fourth quarter of FY25 despite overall revenue challenges. The professional segment was the standout performer, with net sales increasing 1.9% to $3.62 billion and segment earnings margin improving to 19.4% from 18.0% in the prior year. This segment now represents 81% of total company sales, up from 70% in fiscal 2015, highlighting Toro’s successful strategic shift toward higher-margin professional markets. The residential segment continued to face challenges, accounting for 19% of total company sales with net sales of $0.86 billion and a segment earnings margin of 4.2%. Despite this segment’s underperformance, Toro achieved record free cash flow of $578 million, representing a 146% conversion rate, significantly exceeding its previous guidance of 110%.

Moreover, Toro has also strengthened its position in the growing infrastructure market through strategic acquisitions. In fiscal 2025, the company acquired Tornado Infrastructure Equipment, a leader in vacuum excavation trucks designed for safely working around critical infrastructure. Meanwhile, a significant challenge facing Toro is the impact of tariffs, which are expected to create approximately $100 million in headwinds for fiscal 2026, up from $65 million in fiscal 2025. However, the company has successfully mitigated 100% of the tariff impact in fiscal 2025 through several competitive advantages and strategic actions

TTC in the fourth quarter of FY25 has reported the adjusted earnings per share of 91 cents, beating the analysts’ estimates for the adjusted earnings per share of 87 cents, according to analysts polled by FactSet. The company had reported 1 percent decline in the adjusted revenue of $1.07 billion in the fourth quarter of FY25, beating the analysts’ estimates for revenue of $1.05 billion.

Additionally, Toro returned $441 million to shareholders during fiscal 2025, including $290 million in share repurchases (up from $246 million in fiscal 2024) and dividends that increased 6% year-over-year. The company maintained a healthy balance sheet with a leverage ratio of 1.3x, well within its target range of 1.0x to 2.0x.

For fiscal 2026, the company said it expects adjusted earnings of between $4.35 to $4.50 per diluted share. Analysts polled by FactSet expect $4.66. Net sales for the year are expected to grow in the range of 2% to 5%, with the professional segment projected to grow in the mid-single digits while the residential segment is expected to decline in the low to mid-single digits.