Titan Machinery Misses on Q1 Earnings, Lowers FY25 View

Titan Machinery Inc. TITN reported earnings per share of 41 cents in first-quarter fiscal 2025 (ended Apr 30, 2024), which missed the Zacks Consensus Estimate of 67 cents. The bottom line marked a 66% plunge from EPS of $1.19 reported in the year-ago quarter due to lower equipment gross margins and incremental floorplan interest expenses. TITN's results reflect weak demand and high levels of inventory in many product categories.

Total revenues were $628.7 million, up 10.4% from the year-ago quarter. The top line missed the consensus mark of $664 million.

Equipment revenues gained 9% year over year to $468 million and parts revenues were up 12% to $108 million. Revenues generated from service were $45 million, up 29% from the year-ago quarter. Meanwhile, rental revenues were down 16% year over year to $7.3 million.

Costs and Margins

The cost of sales was up 12% year over year to $507 million. Gross profit increased 2.7% year over year to $121.8 million. The gross margin was 19.4% compared with 20.8% in the year-ago fiscal quarter.  Margins were down due to lower equipment margins driven by high levels of inventory and weak demand.

Operating expenses increased 22% from the year-ago quarter to $99 million due to acquisitions. Income from operations was $22.6 million compared with $37.3 million in the year-ago quarter.

Adjusted EBITDA plunged 45% year over year to $24 million. The adjusted EBITDA margin was 3.8% compared with 7.6% in the year-ago quarter.

Floorplan interest expense and other interest expenses totaled $9.5 million compared with $2.5 million in the first quarter of fiscal 2024. The increase was due to a higher level of interest-bearing inventory, including the usage of existing floorplan capacity to finance the O'Connors acquisition.

Segment Performances

Agriculture revenues rose 6% from the last fiscal year's comparable quarter to $447.7 million. The upside was driven by benefits from the acquisition of Scott Supply in January 2024 and same-store growth of 4.3%. However, revenues were impacted by low demand for equipment purchases due to the decline in net farm income this growing season. The segment's income before taxes plunged 46% year over year to $13 million.

Construction revenues were $71.5 million, down 1% from the comparable quarter in the prior fiscal year as modest growth in equipment sales was offset by lower parts sales. The segment reported income before taxes of $0.27 million, down 94% from the year-ago quarter's $4.5 million.

Europe revenues were $65 million, down 12.5% from the year-ago quarter's $74 million reflecting weak demand for new equipment, which was somewhat offset by growth in parts and service revenues. The segment reported income before taxes of $1.35 million, which plunged 79% from $6.4 million in the first quarter of fiscal 2024.
TITN began reporting its Australia segment in the fourth quarter of fiscal 2024. The segment reported revenues of $44.4 million and a loss before taxes of $0.5 million in the first quarter of fiscal 2025.

Cash Flow & Balance Sheet

Cash used for operating activities was $32 million against an outflow of $77.7 million in the first quarter of fiscal 2024. The decline in operating cash flow was driven by the favorable timing of the collection of receivables compared with the prior-year quarter.

Titan Machinery ended the first quarter with a cash balance of around $35.7 million compared with $38.4 million at the end of the first quarter of fiscal 2024. The company's long-term debt was $105 million compared with $106 million as of first-quarter fiscal 2024 end.

FY25 Guidance

The company anticipates low demand in fiscal 2025 due to a decrease in net farm income and broader macroeconomic uncertainty. The Agriculture segment's revenues are anticipated to range from a 2.5% decline to a 2.5% increase.

The Construction segment's growth is expected to be in the range of 0-5% . Construction activity will be sustained at healthy levels, supported by infrastructure projects, energy, livestock and commercial construction.

Revenue growth in Europe is anticipated to range between a negative 5% to flat year over year. Favorable comparisons are expected in the fiscal second half for Romania & Bulgaria due to the impact of drought in the prior comparable period.

The Australia segment's revenues are estimated to be between $240 million and $260 million, backed by the segment's significant backlog.

The company expects EPS in the range of $2.25- $2.75, following a record EPS of $4.93 in fiscal 2024. Ongoing efforts to reduce inventory are expected to impact equipment margins. The company had earlier expected EPS in the range of $3.00-$3.50.

Price Performance

In the past year, shares of Titan Machinery have declined 30.2% against the industry's 10.6% growth.

Image Source: Zacks Investment Research

Peer Performances

Deere & Company DE reported second-quarter (ended Apr 28) earnings of $8.53 per share, which beat the Zacks Consensus Estimate of $7.86. The bottom line decreased 12% from the prior-year quarter on low shipment volumes.

Net sales of equipment operations (comprising Agriculture, Turf, Construction and Forestry) were $13.61 billion, which were down 15.4% year over year but beat the consensus estimate of $13.25 billion. Total net sales (including financial services and others) were $15.24 billion, down 12.4% year over year. Deere expects net income for fiscal 2024 to be $7 billion, down from the prior stated $7.50-$7.75 billion.

Caterpillar Inc. CAT reported first-quarter 2024 adjusted EPS of a record $5.60, which beat the Zacks Consensus Estimate of $5.12. The bottom-line figure marked a 14% year-over-year improvement. Favorable price realization and manufacturing costs, largely reflecting lower freight and improved performance in the Energy & Transportation segment, led to the improvement in earnings. Both the Construction Industries and Resource Industries segments experienced declines in the sales of equipment to end users.

CAT's revenues of around $15.8 billion missed the consensus estimate of $16.1 billion. The top line was flat compared with the year-ago quarter as favorable price realization was offset by lower volumes. Caterpillar expects revenues in 2024 to be in line with the 2023 levels.

AGCO Corp. AGCO delivered an adjusted EPS of $2.32 in the first quarter compared with the prior-year quarter's $3.51. The reported figure topped the Zacks Consensus Estimate of earnings of $2.29 per share. Revenues decreased 12.1% year over year to $2.93 billion, thereby missing the consensus estimate of $2.99 billion.

AGCO Corp expects net sales of $13.5 billion for 2024. The company anticipates lower sales volumes to impact the results. This will be partially offset by modest positive pricing and favorable foreign currency translation. Considering these, management lowered its EPS projection to around $12 from the previously stated $13.15 for 2024.

Zacks Rank

Titan Machinery currently carries a Zacks Rank #3 (Hold).

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