Continuing strong ag fundamentals showed up on Titan Machinery’s bottom line in the third quarter of the company’s fiscal 2011 as revenues rose 37.1% to $311.3 million vs. $227 million in the third quarter last year.
Titan says that it expects the momentum from its third quarter to carry over into its fourth quarter and sees a strong finish to its current fiscal year.
Net income for the third quarter was $7.7 million vs. $5.7 million in the third quarter of fiscal 2010.
All three of the company’s main revenue sources — equipment, parts and service — contributed to this period-over-period revenue growth.
Equipment sales were $241.1 million for the third quarter of fiscal 2011, compared to $173.4 million in the third quarter last year. Parts sales were $42 million compared to $33 million last year. Revenue generated from service was $20.8 million compared to $15.9 million in the third quarter last year.
“In the quarter, the growth in our agriculture business was driven by a number of factors including favorable harvest conditions and crop yields across our footprint and increased demand for our current Tier 3 equipment inventory,” says David Meyer, Titan Machinery’s chairman and CEO.
Same-store revenues increased 29.8% as construction segment same-store revenues rose 32.5% and agriculture same-store revenues rose 29.5%.
Margins Up
Gross profit for the third quarter of fiscal 2011 was $48 million, compared to $39.6 million last year. The company’s gross profit margin was 15.4% compared to 17.4% last year. Gross profit from parts and service revenue contributed 54% of overall gross profit for the period compared to 53% a year earlier.
“Our fourth-quarter estimate calls for equipment margins to expand as industry supplies have tightened and volume incentives are recognized,” Rick Nelson, analyst for Stephens Inc., said in a December 9 note to investors. “We look for a continued narrowing in construction losses as strategies to improve profitability are pulling together.
“Floor plan interest expense should benefit from lower cost floor plan lines beginning in the next quarter. Our fiscal 2012 EPS estimate conservatively calls for 4% same-store growth and assumes a flat industry environment consistent with CNH projections. We note the year-end transition from Tier 3 to Tier 4 Interim in combines should result in stepped up demand for Tier 3 combines, similar to what occurred in tractors this year. We forecast equipment margins to improve slightly assuming industry supplies remain tight,” Nelson says.
Solid Outlook
“We’ve seen favorable commodity prices in recent months, and this, coupled with decreased global supply, should create a strong operating environment for farmers in our markets,” says Meyer.
The company expects to achieve revenue of $970 million to $1.02 billion for the full year ending January 31, 2011 vs. its previous range of $920-980 million. Net income is expected to reach $17.2-$18.6 million vs. previous guidance of $16.7-$18.5 million.
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