Titan Machinery Inc. shares fell Friday after the agricultural and construction equipment seller said that it expects to post disappointing first-quarter results and lowered its full-year earnings forecast.
THE SPARK: The West Fargo, N.D., company said late Thursday that its revenue may come in lower than it had anticipated due to poor weather, some reticence to spend among its agricultural customers and lingering challenges in the construction company.
Titan now expects to post a loss of 1 to 3 cents per share for the quarter on revenue of $440 million. Analysts polled by FactSet, by comparison, were anticipating earnings of 18 cents per share on revenue of $478.4 million.
The company said it now expects to earn $1.70 to $2 for the year; it maintained its revenue forecast of $2.35 billion to $2.55 billion; analysts were expecting much better results for the year at $2.15 per share on revenue of $2.41 billion.
THE BIG PICTURE: The late spring has hurt a number of retailers, from clothing to home improvement stores, but it is particularly difficult for Titan as its customers are work in the weather-sensitive agricultural businesses. And while construction in general has benefited from modest improvements in the economy and housing market, there is still some lingering concern about the uncertainty there.
THE ANALYSIS: William Blair analyst Lawrence De Maria said the preliminary report was a bad start to the year.
The analyst said softer results were already factored into expectations and were the main reason the stock has underperformed the market recently. However, the magnitude of the preannouncement was larger than expected.
Titan had already warned investors that there were several factors that would challenge the company at the start of the year, including inventory reductions and seasonal losses in Eastern Europe. As a result, the analyst said that investor patience is wearing thin.
Baird analyst Mircea Dobre downgraded Titan's rating to "Neutral" from "Outperform" on the news. The analyst said that construction had been an important part of their firm's growth thesis on the company and now the visibility on that industry is more limited. Dobre lowered the price target on Titan to $23 from $28.
SHARE ACTION: Titan's stock fell almost 10 percent to $20.31 by mid-afternoon Friday. It has fallen about 30 percent in the last three months.
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