Raymond James has shifted its recommendation on Toro Co. (NYSE:TTC), moving the stock from Outperform to Market Perform after Toro shares climbed past the firms previous $90 price target. The shares are trading at $100.18, near a 52-week high of $101.08, while momentum indicators tracked by InvestingPro suggest the name is in overbought territory.
Analyst Samuel Darkatsh highlighted the magnitude of the move: Toro has gained more than 40% since Dec. 9, including a roughly 25% uptick following the companys fourth-quarter earnings report. Those gains have outpaced the broader sector, consistent with InvestingPros six-month price-return figure of about 31.93%.
Valuation sits back around the companys 10-year median on one measure, with forward enterprise-value-to-EBITDA at roughly 14 times. Raymond James also notes the expected forward free-cash-flow yield is near 5%, metrics the firm views as more reasonable relative to the elevated levels reached recently. Third-party InvestingPro data included in the firms analysis show Toro trading at a price-to-earnings ratio of 31.71 and an EV/EBITDA of 16.5, which the data provider indicates is slightly above its Fair Value estimate.
On fundamentals, Raymond James points to a mixed picture for the year ahead. The analyst described snowfall conditions as somewhat favorable but expects fiscal 2026 to resemble a fairly normal year, with single-digit earnings-per-share growth anticipated. Operationally, Toro has worked down backlogs and channel inventories have normalized, while homeowner activity remains muted according to the firms market assessment.
Toro reported fourth-quarter 2025 results that beat the consensus on both the top and bottom lines. The company recorded earnings per share of $0.91 versus a $0.90 market expectation, and revenue of $1.07 billion versus the roughly $1.05 billion anticipated. The incremental upside in the quarter coincided with the strong investor response that followed the announcement.
Context from the wider equipment market included a DA Davidson survey of approximately 20 construction-equipment dealers across major brands, which found flat sales in the fourth quarter of 2023. That survey showed dealer sales tracking in line with expectations set in September, indicating no meaningful growth in that period. Raymond James and the survey results together illustrate a market where demand pockets exist but broader end-market activity is not robust.
With shares having outperformed recently and valuation measures moving toward historical medians, Raymond James adjusted its rating to reflect a more cautious stance on the near-term risk-reward for Toro. The firms view balances recent operational normalization and a modest quarterly beat against the premium investors have placed on the stock amid recent strength.
Key points
- Raymond James downgraded Toro from Outperform to Market Perform after shares surpassed the brokers $90 target and approached a 52-week high.
- Toros shares have surged over 40% since Dec. 9, including a 25% jump after Q4 results; InvestingPro reports a six-month price return near 31.93%.
- Valuation metrics have reverted toward a 10-year median (about 14x forward EV/EBITDA) with a forward free-cash-flow yield around 5%; P/E and EV/EBITDA from InvestingPro are 31.71 and 16.5, respectively.
Risks and uncertainties
- Valuation risk: The stocks elevated P/E and EV/EBITDA suggest limited upside if multiples compress further - this affects equity investors in the machinery and equipment sector.
- Demand risk: Muted homeowner activity and normalized channel inventories could restrain revenue momentum, impacting lawn-and-garden equipment producers and related supply chains.
- Market sensitivity: Construction-equipment dealer sales were flat in Q4 2023 per a DA Davidson survey, indicating subdued end-market demand that could influence broader industrial equipment manufacturers.