Titan warns - again - on profits, hitting shares

Titan Machinery shares plunged to a three-year low after the farm equipment retailer, for a third time, cut its forecast for full-year earnings, blaming the "challenges" in both the farming and construction sectors it operates in.

The group - which sells Case and New Holland equipment through a chain of 119 stores in North America, Eastern Europe and Ukraine slashed to $0.55-0.75 a share, from $1.20-1.50 a share, its forecast for earnings for the year to the end of January 2014.

The downgraded figure was well below the $1.29 a share that investors have been factoring in, and stands to be the worst result in nine years.

The revenue estimate was trimmed to $2.15bn-2.35bn, from $2.25bn-2.45bn, at best meeting Wall Street expectations.

The immediate market reaction was to send Titan Machinery shares 11.2% lower to $14.19 in New York, the lowest since August 2010.

'Continuation of challenges'

The reduction to earnings guidance, which followed downgrades in May and September too, reflected the company's performance in the first three quarters of its financial year, during which it revealed that earnings had tumbled by two-thirds to $9.11m.

In the latest, August-to-September quarter, earnings dropped 59% to $5.73m, equivalent to $0.27 a share, well below market expectations of a $0.48-a-share profit, despite a 1.0% rise to $588.0m in sales.

The results "reflect the continuation of challenges in both the agriculture and construction industries that we have previously discussed", David Meyer, the Titan Machinery chief executive said.

The group has previously blamed the drop in grain prices for holding back spending on agricultural machinery.

'Positive cash flow'

Mr Meyer added that while Titan was "not satisfied" with its performance, the group was "confident" in its long-term prospects

"We expect to generate positive cash flow from operations as our inventory levels decline," he said.

Indeed, the group would "focus on managing the controllable aspects of our business, including taking steps to reduce our inventory levels, which will help drive strong cash flow in coming quarters and enable us to navigate macroeconomic and industry headwinds".

Titan shares recovered some ground to stand at $14.73 after half an hour of trading, down 7.7% on the day.

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