Shareholders of Titan Machinery Inc. (NASDAQ:TITN) will be pleased this week, given that the stock price is up 14% to US$10.47 following its latest first-quarter results. In addition to smashing expectations with revenues of US$310m, Titan Machinery delivered a surprise statutory profit of US$0.10 per share, a notable improvement compared to analyst expectations of a loss. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the four analysts covering Titan Machinery provided consensus estimates of US$1.23b revenue in 2021, which would reflect a considerable 8.2% decline on its sales over the past 12 months. Statutory earnings per share are expected to dive 62% to US$0.28 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$1.18b and earnings per share (EPS) of US$0.19 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a very substantial lift in earnings per share in particular.
As a result, it might be a surprise to see thatthe analysts have cut their price target 33% to US$15.67, which could suggest the forecast improvement in performance is not expected to last. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Titan Machinery at US$17.00 per share, while the most bearish prices it at US$15.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Titan Machinery is an easy business to forecast or the the analysts are all using similar assumptions.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. Over the past five years, revenues have declined around 3.9% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 8.2% decline in revenue next year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 4.8% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Titan Machinery to suffer worse than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Titan Machinery's earnings potential next year. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Titan Machinery going out to 2022, and you can see them free on our platform here..
And what about risks? Every company has them, and we've spotted 2 warning signs for Titan Machinery (of which 1 is a bit concerning!) you should know about.
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This article by Simply Wall St is general in nature. 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. Thank you for reading.