WEST FARGO, N.D. - Titan Machinery Inc. (NASDAQ:TITN), a prominent network of full-service agricultural and construction equipment stores, today reported a decline in profitability for the fiscal first quarter ended April 30, 2024.
The company's stock responded to the news with a sharp decline, falling 15%
The company's earnings per share (EPS) of $0.41 fell short of the analyst consensus of $0.65. Additionally, revenue for the quarter was reported at $628.7 million, missing the analyst estimate of $664.78 million and marking a significant downturn from the previous year's net income of $27.0 million, or $1.19 per diluted share.
Bryan Knutson, President and CEO of Titan Machinery, attributed the weaker results to a challenging market environment with softening demand and an excess supply of inventory. "Lower net farm income and the extended duration of higher interest rates are impacting farmer sentiment and influencing farmers' equipment purchasing decisions across our geographic footprint," Knutson explained.
Despite the current market challenges, revenue did increase by 10.4% compared to the first quarter of last year, with equipment revenue growing from $429.4 million to $468.1 million. Parts revenue also saw an uptick from $96.6 million to $108.2 million, and service revenue improved from $34.9 million to $45.1 million. However, rental and other revenue decreased slightly from $8.7 million to $7.3 million.
The company's gross profit margin contracted from 20.8% to 19.4% YoY, mainly due to lower equipment margins driven by higher inventory levels and softening demand. Operating expenses rose to $99.2 million, up from $81.3 million the previous year, largely due to costs associated with recent acquisitions.
Looking ahead, Titan Machinery has revised its full-year modeling assumptions, now anticipating a decrease in agriculture segment revenue by 2.5% to an increase of 2.5%, a flat to 5% increase in construction segment revenue, and a decrease to flat revenue in the Europe segment. The Australia segment's revenue is projected to be between $240M and $260M USD. Diluted EPS expectations have also been adjusted to a range of $2.25 to $2.75.
Knutson remains focused on navigating the declining market environment, stating, "We are laser-focused on utilizing the tools at our disposal to improve our inventory levels as efficiently as possible to ensure we are well positioned moving forward."
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