Why Titan Machinery's Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of farm equipment retailer Titan Machinery (Nasdaq: TITN  ) fell 22% today after the company released earnings.

So what: Revenue was up 32% in the fiscal second quarter to $410.1 million, and the company made a profit of $5.2 million, or $0.25 per share. Analysts had expected $401.9 million in revenue and earnings per share of $0.43.

What really hit investors was the company's reduced earnings guidance for the full year, which management now expects to be between $2.10 and $2.30, down $0.45 from its previous guidance.

Now what: This year's drought in the Midwest is expected to hurt sales, as farmers are expected to preserve cash in 2013. This isn't good for Titan Machinery, but the reaction from the market today is way overdone, in my opinion. Shares now trade at less than 10 times full-year earnings, and I think this will be a short-term blip in performance for the company, providing long-term upside for the stock.

Interested in more info on Titan Machinery? Add it to your watchlist by clicking here.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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  • Report this Comment On September 10, 2012, at 2:41 PM, mookdog7 wrote:

    Agree what an opportunity, TITN areas were not hit as hard as IL or Ind. their farmers will make more money this year, but as always the street panics and over reacts, plus when the stop loss selling gets hit, it just rolls up on itself... TITN will see 24 within the next few day, funny how firms that lose money go up when the don't lose as much. TITN profitable in great markets.

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