Titan Machinery Inc. (NASDAQ:TITN) shares fell 2.07% in pre-market trading on Thursday after the agricultural and construction equipment dealer reported a wider-than-expected second-quarter loss, although revenue came in ahead of Wall Street forecasts.
The company recorded a loss of $0.40 per share, compared with analyst expectations for a loss of $0.35. Revenue reached $496.4 million, exceeding the consensus estimate of $486.51 million.
Sales were nevertheless 9.2% lower than the $546.4 million reported in the corresponding period last year, primarily reflecting softer equipment demand as pressure on grower profitability continued.
Gross margin improves as inventory levels decline
Despite the weaker sales environment, Titan Machinery recorded an improvement in gross profitability. Gross margin expanded by 150 basis points to 18.6% from 17.1% a year earlier.
The increase reflected stronger equipment margins as the company continued reducing aged inventory, alongside a greater contribution from higher-margin parts and service revenue.
“Our fiscal 2027 second quarter results reflect continued progress on improving inventory health, with equipment margins in our Agriculture segment coming in modestly ahead of our expectations for the quarter,” stated Bryan Knutson, President and Chief Executive Officer.
Titan also benefited from lower financing costs. Floorplan and other interest expense declined to $8.1 million from $11.5 million, reflecting a reduction in interest-bearing inventory.
Construction and Australia deliver revenue growth
Performance varied across Titan Machinery’s geographic and operating segments during the quarter.
Agriculture generated revenue of $310.2 million, down 10.3% year over year, while same-store sales declined 8.4%.
Construction delivered stronger results, with revenue increasing 9.2% to $78.6 million as equipment sales improved. Australia also recorded substantial growth, with revenue climbing 35.5% to $41.4 million.
European revenue fell 32.6% to $66.1 million, reflecting more challenging conditions in that market.
Operating expenses edge higher
Operating expenses increased to $94.1 million from $92.7 million in the corresponding quarter last year. As a percentage of revenue, expenses rose to 19.0% from 17.0%, partly reflecting the lower overall sales base.
The improvement in gross margin and reduction in inventory-related interest expense nevertheless highlighted progress in Titan Machinery’s efforts to strengthen inventory efficiency and manage costs through the current equipment cycle.
Titan Machinery maintains fiscal 2027 earnings outlook
For fiscal 2027, Titan Machinery reaffirmed its forecast for an adjusted diluted loss per share of between $1.25 and $1.75. The range encompasses the current analyst consensus for a loss of $1.45 per share.
The company also revised its expectations for individual business segments. Construction revenue is now forecast to increase between 5% and 10%, an improvement from the previous outlook of flat growth to a 5% increase.
For Europe, Titan now expects revenue to decline between 30% and 40%, compared with its earlier forecast for a decrease of 20% to 25%.
Although the second-quarter earnings result fell short of expectations, the revenue beat, expanding gross margin, lower inventory financing costs and stronger outlook for the Construction segment provided evidence of progress as Titan Machinery continues to work through challenging agricultural equipment market conditions.