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Why Titan Machinery, Science Applications International, and Worthington Industries Slumped Today

By Steve Symington – Mar 30, 2017 at 4:51PM

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These stocks lagged the broader market today. Here's what investors need to know.

The stock market rose on Thursday as investors considered encouraging new economic data. According to the Commerce Department, U.S. gross domestic product increased at an annualized 2.1% in the fourth quarter -- above its previously reported 1.9%, but also a deceleration from the 3.5% GDP growth realized in the third quarter. By the end of the day, the Dow Jones Industrial AverageS&P 500, and Nasdaq indexes had each climbed around 0.3%.

But several individual stocks bucked the positive trend with disappointing earnings reports today, including Titan Machinery (TITN 1.76%), Science Applications International Corp (SAIC -0.29%), and Worthington Industries (WOR -11.28%).

Case Tractor from Titan Machinery

Image source: Titan Machinery.

Titan Machinery falls short

Shares of Titan Machinery fell 5.2% after the agricultural and construction equipment dealer announced weaker-than-expected results for the quarter ended Jan. 31, 2017. Quarterly revenue declined 5.3% year over year, to $317.6 million, primarily driven by a 6.9% decline in equipment revenue, to $226.9 million. On the bottom line, that translated to an adjusted net loss (including non-controlling interest) of $6.6 million, or $0.31 per diluted share, narrowed from an adjusted net loss of $30.6 million, or $1.31 per share in the same year-ago period. By comparison, analysts' consensus estimates called for an even narrower net loss of $0.21 per share, but on lower revenue of $313.3 million.

"Throughout fiscal 2017, we took the necessary steps to manage through difficult operating conditions, including reducing our operating expenses and reducing our equipment inventory levels by $197 million, which enabled us to continue to generate solid adjusted cash flow from operations," elaborated Titan CEO David Meyer. 

Titan Machinery further anticipates those difficult conditions will continue into fiscal 2018, though the company should be able to return to adjusted profitability. Coupled with the benefit of reduced inventories, lower floorplan payables, and lower long-term debt, Meyer believes the company will be better poised to handle these headwinds and capture profitable growth opportunities going forward.

SAIC sinks on a miss

Science Applications International Corp stock fell 13.1% after the technology integrator delivered its own disappointing fiscal fourth-quarter results. For the quarter ended Feb. 3, 2017, SAIC's revenue declined 4.2% year over year, to $1.026 billion, with the decline driven partly by a combination of lower subcontractor activity within the company's AMCOM contract portfolio, the recompete loss of an IT integration program for the Department of Homeland Security, and customer delays on a Marine Corps IT services program. SAIC noted these declines were offset by revenue collected under new programs, including the Amphibious Combat Vehicle and GSA Enterprise Operations.

On the bottom line, that translated to net income of $36 million, while adjusted net income per share increased 7% year over year, to $0.79. Analysts, on average, were looking for earnings of $0.80 per share on higher revenue of $1.09 billion.

"SAIC's fourth quarter and full fiscal year 2017 results demonstrate continued execution of the business strategy and although revenue growth was a challenge, we are positioned well against an improving market backdrop," elaborated SAIC CEO Tony Moraco. "Program performance, margin improvement, strong cash flow generation and disciplined capital deployment continue to be the hallmarks of the SAIC shareholder value proposition."

A strong quarter wasn't enough for Worthington Industries

Finally, shares of Worthington Industries declined 9.2% after the metals manufacturing specialist's fiscal third-quarter 2017 results fell short of Wall Street's expectations. That's not to say Worthington's results looked bad on the surface; quarterly revenue grew 8.7% year over year, to $703.4 million, and net income increased 20.5%, to $35.9 million. Earnings per share also rose 17%, to $0.55. But analysts were more optimistic in modeling quarterly net income of $0.64 per share.

On one hand, Worthington Industries chairman and CEO John McConnell called it a "very good third quarter performance," with "near record earnings" in the steel processing segment thanks to higher steel pricing and higher tolling volume. Demand for both helium and camping cylinders also improved the pressure cylinders segment. On the other hand, within the latter business, Worthington also continued to endure soft demand from oil and gas markets.

"We believe the economy continues to strengthen though unevenly, with certain markets not as robust as others," McConnell added. "After a record first and second quarter and a strong third, we anticipate finishing our fiscal year well."

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Titan Machinery Inc. Stock Quote
Titan Machinery Inc.
$28.26 (1.76%) $0.49
Worthington Industries, Inc. Stock Quote
Worthington Industries, Inc.
$38.14 (-11.28%) $-4.85
Science Applications International Corporation Stock Quote
Science Applications International Corporation
$88.43 (-0.29%) $0.26

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