Titan Machinery stock crashes 27% on big preliminary results miss

WEST FARGO, N.D. - Titan Machinery Inc. (NASDAQ:TITN ) shares slumped more than 27% after the agricultural and construction equipment retailer forecast second-quarter results well below analyst expectations, citing lower commodity prices and high interest rates impacting farmer sentiment.

The company expects revenue of approximately $634 million for the fiscal second quarter ended July 31, 2024, falling short of the $694.5 million consensus estimate. Adjusted earnings per share are projected at $0.17, significantly below analysts' expectations of $0.60.

Titan Machinery attributed the weaker-than-anticipated performance to softer retail demand, particularly in agricultural equipment sales. CEO Bryan Knutson noted that commodity prices for key cash crops in the company's footprint have declined steadily since the beginning of the year, retreating an additional 10% to 20% in the second quarter.

Commenting on the report, Baird analysts said the biggest concern is the equipment margin, which is "now expected near historical lows."

"Lower commodity prices and sustained high interest rates, along with mixed growing conditions across our footprint, have negatively affected farmer sentiment resulting in lower agriculture equipment sales in our fiscal second quarter," Knutson stated. 

"We now anticipate these margins may approach the historical lows the Company realized in fiscal years 2016 and 2017.”

Baird analysts maintained a Neutral rating on the stock but slashed their target price from $18 to $13. 

"What is concerning is the fact that that equipment margins are already expected towards decade lows before any real progress has been made in destocking inventory and while meaningfully lower demand volumes are yet to flow through the P&L," they said. 

In response to the challenging environment, Titan Machinery is focusing on reducing inventory levels, particularly used equipment, implementing cost controls, and supporting its customer care strategy to grow parts and service businesses.

The company expects to report adjusted pre-tax income of approximately $6.9 million for the quarter, or a $4.3 million pre-tax loss on a GAAP basis. These preliminary results exclude a non-cash sale-leaseback financing expense of an estimated $11.2 million.

Titan Machinery will release its full second-quarter financial results on August 29, 2024.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Source: Investing.com