TDCurrently have a $179.00 target. GLTA
Q3/25 EPS In Line; ST Macro Backdrop Is
Fluid; Medium to LT Prospects Improving
THE TD COWEN INSIGHT
With Toromont's share price up 39% YTD, the Street may be underwhelmed by an in-line Q3/25, but our view is that Toromont is executing well against a fluid macro, particularly given that current results are reduced by intangible amortization related to the AVL acq'n, which should not recur in 2026. Our medium- to LT outlook is increasingly positive, given the prospect of multi-year infra stimulus.
Event
Toromont reported Q3/25. The conference call is at 8:00 a.m. ET. Dial-in: 1-888-699-1199.
Impact: NEUTRAL
Q3/25 EPS of $1.59 was a penny ahead of the Street at $1.58, and marginally below our forecast of $1.61. There were no variances of note. We backed out a $13.7mm pre-tax gain on a property sale as if the gain were fully taxable at ~27%.
Equipment Group revenue decreased 4% y/y to $1.2bln, as mid-single-digit growth in product support and rental was offset by lower new/used equipment sales, as the company lapped strong mining deliveries in the prior year. Power systems remains an area of strength, including the acquired AVL business, which contributed ~$78mm or ~7% of group revenue. Our view is that product support is in a bit of a lull before the impact of strong new
equipment deliveries in 2023/2024 starts to kick in.
Equipment Group EBIT was roughly flat y/y, excluding the property gain. AVL contributed ~$6mm of pre-tax earnings, even after absorbing $27mm of intangible amortization, which largely relates to acquired backlog and should burn off by early-2026 (many/most companies would add this back as a non-GAAP earnings adjustment). The gross profit margin increased 250bps y/y, based on a favourable sales mix shift (+110bps) and better equipment and product support margins, up 110bps and 30bps, respectively.
Equipment Group bookings increased 49% y/y to $549mm, as strength in power systems, including AVL, and a return to more normal demand dynamics in construction, were partly offset by a difficult prior year comparable in mining. The backlog of $923mm is up 15% y/y, including AVL, but would be down 20% excluding AVL, largely due to some large mining
deliveries over the TTM, which should generate an attractive product support annuity.
CIMCO's EBIT increased 19% y/y to $18mm on 22% revenue growth, including a 28% increase in package sales and 14% growth in product support. The impact of higher revenue was partly offset by an unfavourable sales mix and somewhat lower product support margins. CIMCO's bookings increased 35% y/y and the backlog remains near record levels.
Toromont has net cash of $218mm (treating leases as debt).