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Titan Machinery Inc. (NASDAQ:TITN) Analysts Are Reducing Their Forecasts For This Year

Simply Wall St
·3 min read

Today is shaping up negative for Titan Machinery Inc. (NASDAQ:TITN) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. Surprisingly the share price has been buoyant, rising 17% to US$9.00 in the past 7 days. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

Following the latest downgrade, the current consensus, from the four analysts covering Titan Machinery, is for revenues of US$1.2b in 2021, which would reflect a not inconsiderable 9.2% reduction in Titan Machinery's sales over the past 12 months. Statutory earnings per share are anticipated to plummet 70% to US$0.19 in the same period. Prior to this update, the analysts had been forecasting revenues of US$1.4b and earnings per share (EPS) of US$0.98 in 2021. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.

See our latest analysis for Titan Machinery

NasdaqGS:TITN Past and Future Earnings March 31st 2020
NasdaqGS:TITN Past and Future Earnings March 31st 2020

It'll come as no surprise then, to learn that the analysts have cut their price target 33% to US$15.67. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Titan Machinery analyst has a price target of US$17.00 per share, while the most pessimistic values it at US$15.00. Even so, with a relatively close grouping of analyst estimates, it looks to us as though the analysts are quite confident in their valuations, suggesting that Titan Machinery is an easy business to forecast or that the underlying assumptions are knowable.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Over the past five years, revenues have declined around 6.2% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 9.2% decline in revenue next year. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 3.9% next year. So while a broad number of companies are forecast to decline, unfortunately Titan Machinery is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Titan Machinery. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Titan Machinery analysts - going out to 2022, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.