Titan Machinery Inc. (TITN) Q3 2026 Earnings Call Transcript
Total Revenue $644.5 million, a decrease of 4.8% year-over-year due to weaker demand in domestic Ag, Construction, and Australia segments, partially offset by strength in the European segment.
Gross Profit $111 million, essentially flat compared to $110.5 million in the prior year, with gross profit margin expanding to 17.2% from 16.3%, driven by a 70 basis point improvement in equipment margins.
Net Income $1.2 million, a decrease from $1.7 million in the prior year, attributed to higher variable compensation and transaction-related expenses.
Domestic Ag Segment Revenue $420.9 million, a 12.3% decrease in same-store sales due to challenging farmer conditions, but segment pretax income increased to $6.1 million from $1.8 million due to improved equipment margins and lower expenses.
Construction Segment Revenue $76.7 million, a 10.1% decrease in same-store sales driven by lower equipment sales, with a pretax loss of $1.7 million compared to a $0.9 million loss in the prior year.
Europe Segment Revenue $117 million, an 88% increase in same-store sales (78% net of foreign currency impact), driven by Romanian customers capitalizing on EU subvention funds, with pretax income rising to $3.5 million from a $1.2 million loss.
Australia Segment Revenue $29.9 million, a 40% decrease in same-store sales (39% net of foreign currency impact), reflecting normalization of sprayer deliveries, with a pretax loss of $3.8 million compared to a $0.3 million loss in the prior year.
Inventory Reduction $98 million reduction year-to-date, with a total reduction of $517 million from peak levels in Q2 of the prior year, driven by disciplined sales efforts and divestitures.
Equipment Margins Improved to 8.1% in Q3 from 3.1% in the first half of the fiscal year, driven by better inventory position, favorable sales mix, and a $3.7 million manufacturer incentive accrual.
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Baird Downgrades Titan Machinery, Anticipating Continued Challenges and Limited Earnings Growth Next Year
Baird Downgrade: Titan Machinery's shares fell 9.3% after Baird downgraded them to Neutral from Outperform, citing challenges in FY 2027 due to expected declines in both U.S. and European agricultural segments.
Market Conditions: Deere's forecast of a 15%-20% decline in Large Ag volumes for CY 2026, which corresponds to Titan's FY 2027, suggests that growth in Small Ag won't sufficiently offset losses, particularly as European subsidies diminish.
Inventory Adjustments: Titan has successfully reduced equipment inventories by nearly 40% from peak levels, which has helped the stock recover some value, with a 31% year-to-date increase despite ongoing earnings pressure.
Valuation Outlook: The current valuation of Titan Machinery is deemed more appropriate by analysts, considering the anticipated further compression of earnings and book value in the challenging agricultural market.
Zscaler Analyst Changes Stance; Check Out the Top 5 Downgrades for Monday
Analyst Downgrades: Several top Wall Street analysts have downgraded their ratings on various companies, including Titan Machinery, Zscaler, Argan, American Tower, and MPLX, reflecting a shift in market outlook.
Titan Machinery: Baird analyst Mircea Dobre downgraded Titan Machinery from Outperform to Neutral, lowering the price target from $24 to $21, with shares closing at $18.52.
Zscaler: Bernstein analyst Peter Weed downgraded Zscaler from Outperform to Market Perform, setting a price target of $264, while shares closed at $251.50.
Other Notable Downgrades: JP Morgan's Michael Fairbanks downgraded Argan from Overweight to Neutral, Barclays' Tim Long downgraded American Tower from Overweight to Equal-Weight, and JP Morgan's Jeremy Tonet downgraded MPLX from Overweight to Neutral.
