Can Share Buybacks Continue to Prop Up Toro Stock

Toro (TTC) trades within about 4% of its 52-week high, and it keeps buying back shares with cash from zero-turn mowers, golf equipment and Ditch Witch drills. But over three years the buybacks have only softened a fall in earnings per share, and today's price assumes profit growth comes back.

Why Does Your Slice Of Toro Grow When Its Profit Has Not?

Over the last three years Toro has shrunk its share count by about 2.6% a year on average. Do nothing, and your stake still grows.

Over the past twelve months, Toro allocated an estimated $375 million to share repurchases and roughly $150 million to dividends, yielding a net trailing shareholder return of approximately 5.3% after adjusting for stock-based compensation.

The catch is what that stake earns. Net income fell 4.4% a year on average over those three years. Earnings per share fell just 1.8% a year on average, because the profit was split among fewer shares. The buyback softened the decline but did not create growth.

So Where Does Toro Find The Cash To Keep Buying?

It comes from a business that needs little reinvestment. In the past twelve months Toro generated about $832 million of operating cash flow and spent about $73 million on capital projects. Free cash flow covers the buybacks and dividends about 1.4 times.

Some of that cash will not repeat. Management says better working capital, including $153 million less inventory than a year earlier, helped lift free cash flow so far in fiscal 2026. Inventory cannot fall every year, so future buybacks will lean harder on profit.

Debt is not the constraint. Net debt is about 1.5 times EBITDA, a moderate level, and operating earnings cover the interest bill 8.2 times.

Is Toro's Profit Starting To Turn?

Toro's latest quarterly results suggest a profit turnaround may be taking shape. Net sales rose 8.4% in fiscal Q3 2026, or 6.2% organically, and management raised its full-year sales and adjusted earnings-per-share outlook. Landscape contractor sales grew by double digits, helped by the redesigned Exmark Radius zero-turn mower. Underground construction, where Ditch Witch drills help bring power and utilities to data center sites, grew mid-single digits.

What lifts margins once savings from Toro's multi-year productivity initiative-the Amplifying Maximum Productivity (AMP) program-have flowed through is less clear. The CFO says the AMP cost program will beat its $125 million run-rate savings target by the end of fiscal 2026, when the program itself ends. AMP was the main reason Toro's adjusted operating margin rose 30 basis points in fiscal Q3. The CFO expects savings still flowing into fiscal 2027 to keep margins expanding.

The price already assumes that turn. The stock gained 26% over three years even as earnings per share fell. So buyers now pay more for each dollar of profit, about 28 times trailing earnings.

Toro looks fairly priced if margins keep rising after AMP ends, and expensive if they stall. Management will give formal fiscal 2027 guidance with its next report, due in December. Until then, weigh whether Toro can reclaim its status as a reliable compounder against businesses that are already growing their bottom lines.

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