Shares in Titan Machinery plunged 18% after the machinery dealer unveiled an unexpected fall in profits and flagged potential headwinds from lingering US drought to agricultural sales.
The US-based dealer in Case and New Holland equipment, which is expanding into Eastern Europe, and this month opened a dealership in Ukraine, said that its earnings for the November-to-January quarter dropped 12.4% to $15.4m.
The earnings were equivalent to $0.73 per share, below the $0.84 per share a year before, and the $0.92-per-share result that Wall Street had expected.
While revenues rose 29% at $784.5m, growth was led by sales of equipment rather than higher-margin parts and servicing operations, with the construction division seeing its profits hurt by "difficult industry conditions as well as us falling short of operational targets".
Indeed, while the larger agriculture division achieved a 7.8% rise to $32.8m in pre-tax profits, the construction unit fell $5.48m into the red.
'Wait-and-see sentiment'
However, North Dakota-based Titan forecast some headwinds for its agriculture division, given the movement of US drought conditions north into its core territory.
The western Corn Belt is starting the spring planting season "with low subsoil moisture levels", the group said, noting also, further south, the "delayed planting due to snow and cool weather".
Indeed, "unknown yields and potential volatility in commodity prices may lead to a 'wait-and-see' sentiment" among farmers during the first half of the group's financial year, which started in February.
The group forecast like-for-like sales growth in agriculture slowing to 0-5% over the financial year, from 10.9% the previous year.
'Better market conditions'
Titan forecast a recovery in its construction division, where same-store sales growth for the newly-started financial year was pegged at 10-15%.
"We anticipate better market conditions and are refocusing our efforts to improve the profitability of the business," David Meter, the Titan chairman and chief executive, said.
Titan forecast revenues of $2.35bn-2.55bn, earnings of $42.8m-49.2m, and earnings per share of $2.00-2.30 in the current year, all ranges which straddle market expectations.
Nonetheless, Titan shares tumbled 18% to $21.30 in opening deals in New York.
Source: Agrimoney.com