Why Are Titan Machinery Shares Trading Lower Today

  • Titan Machinery Inc. TITN reported fourth-quarter FY22 revenue growth of 16.2% year-on-year, to $507.59 million, missing the consensus of $524.6 million.
  • Equipment sales increased by 16.7% % Y/Y, and Parts sales rose 17.3%.
  • Revenue by Segments: Agriculture $346.33 million (+14.2% Y/Y), Construction $87.88 million (-1.1% Y/Y) and International $73.39 million (+64.4% Y/Y).
  • Adjusted EPS improved to $0.99 from $0.09 in 4Q21, beating the consensus of $0.54.
  • The gross profit margin expanded to 18.6% for the quarter, compared to 15.5% in 4Q21. The operating margin expanded by 430 bps to 5.8%.
  • Operating expenses as a percentage of revenue improved 120 bps to 12.7%.
  • Adjusted EBITDA increased to $35.87 million, from $13.69 million, and the margin expanded by 393 bps to 7.1%.
  • TITN generated cash by operating activities of $158.9 million in FY22 versus $173.0 million in FY21.
  • Cash at Q4-end was $146.1 million. Inventories increased to $421.8 million as of January 31, 2022, from $418.5 million a year ago.
  • Acquisition: Titan Machinery has agreed to acquire the assets of Mark's Machinery, Inc., which consists of two full-line Case IH agriculture dealerships located in Wagner and Yankton, SD. Deal terms of the all-cash transaction were not disclosed.
  • Mark's Machinery generated ~ $34 million revenue in the trailing twelve-month period ended December 31, 2021.
  • The company expects to close the transaction in early April 2022 and to be accretive to EPS.
  • Given the unknown duration of the Russia/Ukraine conflict, the company currently assumes minimal revenue contribution from its Ukraine operation and, as a result, is estimating ~$0.25 per share of losses due to unabsorbed expenses in FY23.
  • FY23 Outlook: The company expects EPS of $2.55 - $2.85, versus the consensus of $2.82.
  • Price Action: TITN shares are trading lower by 7.10% at $31.03 during the market session on Thursday.

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