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Category: Stock Market and Titan Machinery
Date: 2 December 2019 Stock Price: $13.47 We take a look at the 3rd quarter 2020 earnings report of Titan Machinery a company that operates a network of full service agricultural and construction equipment stores in the USA and Europe.
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About Titan Machinery
Titan Machinery is a multi-unit business with mature locations and newly-acquired locations. The Company owns and operates a network of full service agricultural and construction equipment stores in the United States and Europe. Although Titan Machinery was founded in 1980, it has roots in two Red River Valley dealerships dating back to 1926 and has legacy stores dating back to the turn of the century. Titan Machinery currently operates a network of 74 North American dealerships in North Dakota, South Dakota, Iowa, Minnesota, Montana, Nebraska, Wyoming, Wisconsin, Colorado, Arizona, and New Mexico, and 30 European dealerships in Romania, Bulgaria, Serbia, Germany and Ukraine
Overview of Titan Machinery's 3rd quarter 2019 earnings report
The data below refers to the latest quarter unless specified otherwise:
- Total revenue: $360.936 million (up from $360.913 million for the same quarter in the previous year)
- Net sales increased by 0.006% over the last 12 months
- Cost of revenue: $289.162 million (down from $291.371 million for the same quarter in the previous year)
- Cost of revenue decreased by -0.75% over the last 12 months
- Net earnings: $8.214 million (down from $10.776 million for the same quarter in the previous year)
- Diluted earnings per share: $0.37 (down from $0.48 for the same quarter in the previous year)
- PE ratio of Titan Machinery: 16.8
- Diluted number of shares in issue: 21.976 million (up from 21.842 million for the same quarter of the previous year)
- Cash and equivalents: $52.420 million
- Cash and equivalents per share: $2.38
- Cash and equivalents makes up 17.7% of Titan Machinery's current market capital
- Cash and equivalents makes up 5% of Titan Machinery's total assets
- Inventories: $624.215 million
- Inventories makes up 60.6% of Titan Machinery's total assets
- Titan Machinery inventories increased by 27.1% over the last 12 months. This is a worrying number as it suggests that the group is struggling to move their stock quickly enough which is leading to a build up of their inventories. If its not sold quickly enough prices will be marked down to move the goods, which will affect the company's margins
Titan Machinery's management commentary on their 3rd quarter 2020 earnings and guidance
WEST FARGO, N.D., Nov. 26, 2019 (GLOBE NEWSWIRE) -- Titan Machinery Inc. (Nasdaq: TITN), a leading network of full-service agricultural and construction equipment stores, today reported financial results for the fiscal third quarter ended October 31, 2019.
David Meyer, Titan Machinery's Chairman and Chief Executive Officer, stated, "Our higher margin parts and service business experienced strong growth during the seasonally important third quarter and drove higher gross profits across all three of our segments. This strong parts and service activity helped generate solid performance in our Agriculture segment, which grew top and bottom line despite very difficult harvest conditions and persistent macroeconomic uncertainty. While we wait for the environment to stabilize, we remain focused on providing exceptional customer care and managing the controllable aspects of our business, which poises us well for growth and enhanced profitability once industry conditions improve."
David Meyer, Titan Machinery's Chairman and Chief Executive Officer, stated, "Our higher margin parts and service business experienced strong growth during the seasonally important third quarter and drove higher gross profits across all three of our segments. This strong parts and service activity helped generate solid performance in our Agriculture segment, which grew top and bottom line despite very difficult harvest conditions and persistent macroeconomic uncertainty. While we wait for the environment to stabilize, we remain focused on providing exceptional customer care and managing the controllable aspects of our business, which poises us well for growth and enhanced profitability once industry conditions improve."
Mr. Meyer concluded, "We are extremely excited about bringing Northwood into the Titan Machinery family and expanding our footprint in the Red River Valley. The addition of this location will further support the service network we provide our customers in this important growing region. We are including Northwood's expected contributions in our modeling assumptions for the balance of the year and remain confident in our ability to achieve our Agriculture growth assumption for Fiscal 2020 despite the difficult harvest conditions our customers continue to experience. However, a higher effective consolidated tax rate and continued market driven challenges within our International Segment are pressuring our previous modeling assumptions. As a result, we are refining our Diluted and Adjusted Diluted EPS assumptions to the lower half of our prior expected ranges."
Updated Fiscal 2020 Modeling Assumptions
The following are the Company's current expectations for fiscal 2020 modeling assumptions:
Current Assumptions Previous Assumptions
Segment Revenue
Agriculture Up 2-7% Up 2-7%
Construction Up 5-10% Up 5-10%
International Flat Up 2-7%
Diluted EPS $0.50 - $0.60 $0.50 - $0.70
Adjusted Diluted EPS $0.75 - $0.85 $0.75 - $0.95
Updated Fiscal 2020 Modeling Assumptions
The following are the Company's current expectations for fiscal 2020 modeling assumptions:
Current Assumptions Previous Assumptions
Segment Revenue
Agriculture Up 2-7% Up 2-7%
Construction Up 5-10% Up 5-10%
International Flat Up 2-7%
Diluted EPS $0.50 - $0.60 $0.50 - $0.70
Adjusted Diluted EPS $0.75 - $0.85 $0.75 - $0.95
Titan Machinery (NASDAQ: TITN) stock price history
The image below, obtained from Google shows the stock price history of Titan Machinery for the last 5 years. And its been a rather average time for Titan Machinery stockholders. 5 years ago the stock of Titan was trading at $12 and its currently trading at $13.47. That's a very flat return of 12.3% provided to Titan Machinery stockholders over the last 5 years.
The stock of Titan is trading at a lot closer to its 52 week low of $11.99 than it is to its 52 week low of $21.88 which to us is a clear indication that the short term sentiment and momentum of Titan Machinery is negative
The stock of Titan is trading at a lot closer to its 52 week low of $11.99 than it is to its 52 week low of $21.88 which to us is a clear indication that the short term sentiment and momentum of Titan Machinery is negative
Recent coverage of Titan Machinery
The extract below covers the latest regarding Titan Machinery as obtained from TheStreet.com
Legendary investor Warren Buffett advises to be fearful when others are greedy, and be greedy when others are fearful. One way we can try to measure the level of fear in a given stock is through a technical analysis indicator called the Relative Strength Index, or RSI, which measures momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.
In trading on Wednesday, shares of Titan Machinery, Inc. (TITN - Get Report) entered into oversold territory, hitting an RSI reading of 29.1, after changing hands as low as $13.9299 per share. By comparison, the current RSI reading of the S&P 500 ETF (SPY) is 81.4. A bullish investor could look at TITN's 29.1 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side.
Legendary investor Warren Buffett advises to be fearful when others are greedy, and be greedy when others are fearful. One way we can try to measure the level of fear in a given stock is through a technical analysis indicator called the Relative Strength Index, or RSI, which measures momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.
In trading on Wednesday, shares of Titan Machinery, Inc. (TITN - Get Report) entered into oversold territory, hitting an RSI reading of 29.1, after changing hands as low as $13.9299 per share. By comparison, the current RSI reading of the S&P 500 ETF (SPY) is 81.4. A bullish investor could look at TITN's 29.1 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side.
Titan Machinery (NASDAQ: TITN) stock valuation
So based on Titan Machinery latest earnings report ad their fiscal guidance what do we value the stock of Titan Machinery? Based on their earnings report and guidance provided our valuation model provides a target (full value price) for Titan at $12.80 a stock We therefore believe the stock of Titan Machinery is overvalued
We recommend that long term fundamental and value investors look to enter a stock at least 10% below our target (full value) price which in this case is $12.80. A good entry point into Titan Machinery stock would therefore be at $11.50 or below.
We expect the stock of Titan Machinery to pull back from current levels to levels closer to our target (full value) price in coming weeks and months.
We recommend that long term fundamental and value investors look to enter a stock at least 10% below our target (full value) price which in this case is $12.80. A good entry point into Titan Machinery stock would therefore be at $11.50 or below.
We expect the stock of Titan Machinery to pull back from current levels to levels closer to our target (full value) price in coming weeks and months.
Next earnings release of Titan Machinery
It is expected that Titan Machinery will release their 4th quarter and full fiscal 2019 earnings report towards the end of February 2020