What happened
Shares of agricultural and construction equipment retailer Titan Machinery (NASDAQ: TITN) powered 15.2% higher through 10 a.m. ET on Thursday after the company reported big beats on both top and bottom lines for the fiscal second quarter of 2024.
Heading into the quarter, analysts had forecast Titan would earn only $1.17 per share (6% year-over-year growth) despite growing sales 21% to $602.4 million. In fact, Titan reported a profit of $1.38 per share, and sales of $642.6 million.
So what
That worked out to an even greater-than-expected 29% year-over-year growth rate for Titan's sales in the second quarter, and profits growth much better resembling the sales growth rate -- 25%. And as CEO David Meyer commented, growth was strong across all three segments, in U.S. agricultural equipment, in U.S. construction equipment, and internationally (where Titan incidentally picked up a new acquisition, Australia's J.J. O'Connor & Sons).
Furthermore, demand for Titan's products is "ongoing." As Meyer explained, it's really supply that's the limiting factor for Titan's growth right now, as the company is still having trouble getting all the high-horsepower tractors, self-propelled sprayers, and wheel loaders it needs to satisfy customer demand -- a situation that could extend into the first half of calendar year 2024.
Now what
Now what effect will this have on Titan's results going forward? Actually, not a whole lot, seeing as Titan appears to have baked these assumptions into its guidance already. For this reason, management left its guidance mostly intact, and still expects to grow agricultural equipment sales 20% to 25% this year, and construction equipment 5% to 10%. International (now called Europe) sales projections are coming down a bit -- to between 5% and 10% -- but will be supplemented by $70 million to $90 million in new Australian sales. Earnings for the year will still range from $4.60 to $5.25.
When you consider that this all works out to a current-year P/E ratio of about 6.7 on Titan stock (based on the midpoint of earnings guidance), and that midpoint growth rates across the board are all 7.5% or better, I have to conclude Titan Machinery stock is looking like kind of a great bargain today.
No wonder investors are buying it.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
