Toromont Industries (TSX:TIH) Stock Faces Margin Pressure As AVL Sales Surge

Toromont Industries shareholders came into this earnings print on the back foot, with the stock down about 9% over the past month and 2% over three months, even as expectations stayed high for this premium priced industrial at roughly 32.8x trailing earnings. The headline from Q2 is not about a miss or a blowout on profit. It is the powerful revenue engine in the core Equipment Group and the AVL power business, where consolidated revenue reached CA$1.60b and trailing 12 month sales hit CA$5.56b. The market needs to decide if that growth justifies the existing valuation strain.

Is Toromont Industries really trading at a bargain 29.6% below a DCF estimate, or is the 32.8x P/E multiple a warning sign? See how the current valuation stacks up in the valuation analysis for Toromont Industries

Q2 2026 Earnings Summary

• Revenue, Q2 2026 vs. Q2 2025: CA$1,597.7m vs. CA$1,376.5m (up about 16%)
• Net Income, Q2 2026 vs. Q2 2025: CA$124.5m vs. CA$124.3m (broadly flat)
• Basic EPS, Q2 2026 vs. Q2 2025: CA$1.53 vs. CA$1.53 (broadly flat)
• Net Profit Margin, TTM to Q2 2026 vs. TTM to Q2 2025: 9.3% vs. 9.5% (slight margin compression)

Prefer clear charts instead of scrolling through another wall of earnings tables and footnotes? See Toromont Industries' full visual picture, including how its valuation, earnings and cash generation line up in the company report for Toromont Industries.

Toromont bull story leans on AVL and backlog proof

Bulls argue Toromont Industries is building a higher quality, more recurring business on the back of AVL, data centers and a strong backlog. The Q2 numbers go a fair way to support that. Equipment Group revenue grew in the mid teens with gross margin expansion of more than 250 bps and rentals and product support both higher. That backs the claim of a healthier mix, not just one off big iron deliveries. AVL revenue reached CA$171m in Q2 versus CA$57m a year ago and CA$300m year to date versus CA$79m. That is a clear milestone in the data center and power thesis. The CA$2.9b consolidated backlog, with a large AVL related power order and most of it expected to ship within 12 months, also lines up with the “visibility rich” narrative.

Bear case tests margins, AVL risk and cyclicality

The bear story focuses on margin pressure, AVL execution risk and over investment if demand cools. On margins, reported net income and EPS were flat year on year in Q2 and the trailing net margin eased from 9.5% to 9.3%. That shows some of the pressure bears worry about. However, operating income rose more than 40% and management highlighted that non cash AVL purchase commitment charges of CA$54.3m in Q2 meaningfully reduced reported profit. AVL expansion risk is visible in higher capex and new facilities that add capacity before revenue. CIMCO’s 1% Q2 revenue decline and roughly 20% drop in operating income also support concerns that more cyclical pockets can drag on group results when project timing and mix turn less favourable.

Compare Toromont Industries' strong AVL growth, backlog visibility and margin questions with what the street is signalling. See the consensus price target analysis for Toromont Industries

Take Control of Your Next Move

If Toromont Industries' mix of AVL growth, a large backlog and high P/E has caught your attention, register for free with Simply Wall St and add it to a Watchlist so you can track share price against fair value and watch how new earnings reshape the thesis. Once you hold Toromont Industries or any other stock, use the Portfolio Command Center to cut through noise and focus on the key fundamental and valuation changes that matter. For longer term decisions, tap into crowd insights through the Community and see how other investors are reacting to the same data. By spotting potential catalysts and risks early, you can make faster, more informed calls and stay ahead of the market.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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