Editor's Note: Titan Machinery's announcement that it has acquired a Case IH dealership in Romania and is now expanding internationally came as no surprise to the editors of Farm Equipment and Ag Equipment Intelligence.

In the September 2011 issue of Ag Equipment Intelligence, Rick Nelson, financial analyst for Stephens Inc. was quoted as saying he would not be surprised to see Titan enter international markets, including Eastern Europe, where the industry is ripe for consolidation. “Given Titan’s successful track record of consolidation in the Upper Midwest, we think CNH would look to Titan to bring its expertise to foreign markets.”

Here's the full story as it appeared in Ag Equipment Intelligence.

From Ag Equipment Intelligence, September 2011

Driven by stronger than expected wholegood revenues and higher parts and service sales, Titan Machinery posted solid top and bottom lines during the second quarter of fiscal 2012 ended July 31. Nonetheless, concerns over higher equipment inventories were enough for some shareholders to back off following Titan’s earning release on September 8.

One analyst called the concerns “overblown.”

For the period, Titan reported revenues of $310.8 million, up from $209.7 million, or 48.3%, compared with the same period of 2011. This easily beat the industry consensus of $293 million.

Equipment sales came in at $225.3 million for the period vs. $153.1 a year ago. Parts sales rose to $49.3 million from $33.9 million, and revenue from services was $25.4 million compared with $17.5 million during the second period of 2011.

With the acquisition of two Nebraska dealerships in the second quarter, Titan Machinery now owns 89 locations and continues to rank as Case IH’s largest dealer network for farm machinery.

Margins Up

Titan Machinery’s gross profit for the second quarter improved to $55.9 million compared with $36 million a year earlier. Its gross profit margin increased to 18% during the period vs. 17.2% for the same period of ’11 due to higher margins for service and other revenue streams. Gross profit from parts and service rose to $31.3 million from $20.3 million last year. Net income for the quarter was $6.3 million compared to $2.7 million a year earlier.

Solid Outlook

Titan says it expects to reach full-year revenues (ending January 31, 2012) in the range of $1.33-1.405 billion compared to its previous estimate of $1.31-1.385 billion.

Net income is forecast $31.8-33.9 million for the year vs. the previous projection of $31.2-33.3 million. The company looks for ag segment same-store-sales growth of 8-13% vs. its prior range of 5-10%. Construction segment same-store sales growth is now expected to be 18-23% compared with the prior range of 12-18%. Titan continues to forecast equipment margins at approximately 9.8%.

“Ag industry growth drivers remain healthy with high crop prices due to tight global supplies and growing farm incomes, favorable crop growth in Titan markets and continuing depreciation tax incentives to motivate purchases,” Rick Nelson of

Stephens Inc. said in a note.

“We believe acquisitions remain an integral part of Titan’s growth strategy and 10-15% of growth will come through acquisitions.”

Nelson says he would not be surprised to see Titan enter international markets, including Eastern Europe, where the industry is ripe for consolidation. "Given Titan's successful track record of consolidation in the Upper Midwest, we think CNH would look to Titan to bring its expertise to foreign markets."

Overblown Concerns

In a note to investors, Robert McCarthy, analyst for RW Baird commented on some shareholders who were concerned about Titan Machinery’s rising inventory, calling them “overblown.”

He says of the $159 million sequential inventory increase in the second quarter, “roughly $43 million is from acquisitions and the balance is primarily new equipment to support seasonally stronger second half 2012 equipment sales and to circumvent potential manufacturer supply constraints,” says McCarthy.