Titan Machinery’s (NASDAQ:TITN) Q4 Sales Beat Estimates But Stock Drops

Heavy equipment distributor Titan Machinery (NASDAQ: TITN) announced better-than-expected revenue in Q4 CY2024, but sales fell by 10.8% year on year to $759.9 million. Its non-GAAP loss of $1.98 per share was significantly below analysts’ consensus estimates.

Is now the time to buy Titan Machinery? Find out by accessing our full research report, it’s free.

"Our fiscal fourth quarter results reflect a significant step forward in the execution of our inventory reduction initiative, particularly in our domestic Agriculture segment. We reduced inventory by approximately $304 million during the fourth quarter, bringing our total reduction since our fiscal second quarter peak to approximately $419 million," commented Bryan Knutson, Titan Machinery's President and Chief Executive Officer.

Company Overview

Founded in 1980, Titan Machinery (NASDAQ: TITN) is a distributor of agricultural and construction equipment across the United States and Europe.

Specialty Equipment Distributors

Historically, specialty equipment distributors have boasted deep selection and expertise in sometimes narrow areas like single-use packaging or unique lighting equipment. Additionally, the industry has evolved to include more automated industrial equipment and machinery over the last decade, driving efficiencies and enabling valuable data collection. Specialty equipment distributors whose offerings keep up with these trends can take share in a still-fragmented market, but like the broader industrials sector, this space is at the whim of economic cycles that impact the capital spending and manufacturing propelling industry volumes.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Titan Machinery grew its sales at an incredible 15.7% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Titan Machinery’s annualized revenue growth of 10.6% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Titan Machinery’s revenue fell by 10.8% year on year to $759.9 million but beat Wall Street’s estimates by 4.3%.

Looking ahead, sell-side analysts expect revenue to decline by 10.2% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will see some demand headwinds.

Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.

Operating Margin

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Titan Machinery was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.1% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Looking at the trend in its profitability, Titan Machinery’s operating margin decreased by 2.7 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. . Titan Machinery’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Titan Machinery generated an operating profit margin of negative 6%, down 10.7 percentage points year on year. Since Titan Machinery’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Titan Machinery, its EPS declined by 29.8% annually over the last five years while its revenue grew by 15.7%. This tells us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of Titan Machinery’s earnings can give us a better understanding of its performance. As we mentioned earlier, Titan Machinery’s operating margin declined by 2.7 percentage points over the last five years. Its share count also grew by 3%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Titan Machinery, its two-year annual EPS declines of 51.4% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q4, Titan Machinery reported EPS at negative $1.98, down from $1.05 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Titan Machinery to improve its earnings losses. Analysts forecast its full-year EPS of negative $1.33 will advance to negative $0.86.

Key Takeaways from Titan Machinery’s Q4 Results

We were impressed by how significantly Titan Machinery blew past analysts’ revenue expectations this quarter. On the other hand, its full-year EPS guidance missed significantly and its EBITDA fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 8.9% to $13.42 immediately following the results.

Titan Machinery’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.