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Titan Machinery flags ag machinery market improvement, helping shares soar

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Titan Machinery flagged “improved sentiment” in the US farm machinery market, and accelerating growth in eastern Europe, as the equipment dealer revealed a sharp improvement in its fortunes, marked by upgraded sales guidance, sending its shares flying.

 

Shares in the North Dakota-based dealer in Case and New Holland equipment jumped 23% in mornin deals in New York, to a four-year high of $20.50, before easing back to $18.29 in midday deals, a gain of 13.4% on the day.

 

Titan Machinery, which also operations in the likes of Bulgaria, Romania and Ukraine besides the US, improved to $0.15-0.25 per share, from $0.15-35 per share, its forecast for its loss for the year to the end of January.

 

The revision reflected in part an upgrade to 30-35%, from 20-25%, in the forecast for sales growth at its eastern European arm, where demand has been helped by “positive crop conditions”.

 

In the US, by far Titan’s most important market, the group stuck with expectations of a drop in sales, but reduced the forecast pace of decline over the financial year to 5-10%, from 10-15%.

 

‘Improved sentiment’

 

David Meyer, the Titan Machinery chairman and chief executive, said that the US ag division had found “improved customer sentiment” which had allowed it to cut further its inventory of used equipment, while spurring it to accelerate to $108m its growth in stocks of new equipment.

 

“Based on more confident customer sentiment in our agriculture segment, and expected improvements in fourth quarter [November-to-January] demand, we increased our new agriculture equipment inventory levels” during the August-to-October period, Mr Meyer said.

 

The comments come amid increasing signs of recovery in the US machinery market, with shares in John Deere-maker Deere & Co extending a series of record highs after the group last week unveiled estimate-beating results, and forecast 9% growth in farm sales this year.

 

Deere forecast industry sales growth in the Canadian and US markets of 5-10% for 2018, “supported by higher demand for large equipment”.

 

Data from the Association of Equipment Manufacturers show growth in US sales of four wheel drive tractors accelerating from an average of 2.1% over the first nine months of 2017 to 15.0% in October.

 

US combine sales grew last month by 69%, having shrunk by 3.5% over the January-to-September period.

 

Ahead of forecasts

 

Titan Machinery’s comments came as the group unveiled a jump in earnings for the August-to-October quarter to $2.38m, from $256,000 a year before, on revenues up 1.8% at $216.0m.

 

Underlying earnings per share, of $0.20, came in well ahead of the $0.08-per-share result that Wall Street had pencilled in.

 

And Mr Meyer forecast “continued year-over-year net income improvements” for the current, November-to-January quarter.

 

The comments results contrast with an assessment three months ago of “soft demand” in farm equipment markets, in a statement which sent the group’s shares plunging 17%.

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