What happened
Shares of tiny Titan Machinery (TITN 0.40%) are on a tear today, up 24.2% as of noon EST after the agricultural and construction equipment retailer reported estimate-thumping sales and earnings this morning.
Heading into third-quarter earnings, analysts had forecast that Titan would earn $0.36 per share on a bit more than $360 million in quarterly sales. Instead, Titan reported today that it earned $0.48 per share GAAP, and $0.49 pro forma, on sales of $363.6 million.
Titan isn't treading lightly on guidance this quarter. Should investors dig in? Image source: Getty Images.
So what
Titan's sales grew a respectable 10% year over year, with new and used equipment sales outpacing equipment revenues -- suggestive of increasing confidence among Titan's customers that good times are here to stay (at least for a while). Operating costs grew more slowly and actually declined as a percentage of revenue, and as a result, earnings exploded upward -- increasing more than fourfold in comparison to last year's Q3.
Now what
With strong Q3 earnings now officially on the books, Titan updated its guidance for the rest of this year. Sales growth estimates held firm at anywhere from 0% to 15% depending on the division. The profit margins that Titan expects to earn on those sales, moreover, have increased markedly. Instead of the 8.7% to 9.2% operating profit margins Titan formerly anticipated earning, it now expects to earn anywhere from 9.1% to 9.4% per revenue dollar, resulting in adjusted diluted EPS of anywhere from $0.65 to $0.75 per share.
At the low end, that maxes out Titan's previous earnings guidance. At the high end, it raises the roof on potential profits by a full dime. No wonder shareholders are pleased.
