Reuters, Published April 10 2014
Titan Machinery expects construction unit to break evenHeavy equipment retailer Titan Machinery Inc said it expects its construction machinery business to break even this year after losing money for two years, reducing the impact from a slowdown in its larger farm equipment division.
The company said it was closing and consolidating seven construction stores and cutting about 12 percent of the workforce at the unit as it tries to take advantage of a recovery in the U.S. construction market.
Titan's shares rose as much as 14.4 percent after the company also reported an adjusted quarterly profit that beat analysts' average estimate.
"By reducing these jobs and closing stores, Titan is hoping to improve the profitability of its construction unit, which has been a drag for the last couple of years," Longbow Research analyst Neil Frohnapple said.
Titan is trying to reduce reliance on its agriculture machinery business, which has suffered from falling demand as low corn prices have reduced farmers' ability to spend on new equipment.
Net farm income is expected to fall 27 percent this year, according to the U.S. Department of Agriculture.
Farm equipment maker Agco Corp in February warned of weak demand in 2014, citing lower demand from U.S. farmers.
But Titan said it expected its construction business to reduce the impact of a weak agricultural market this year.
"We expect a bigger pickup on the construction side than what the agriculture side decline would be ...," Chief Financial Officer Mark Kalvoda said on a post earnings call.
The company forecast adjusted earnings of 70 cents to $1.00 per share for the year ending Jan. 31.
Analysts on average were expecting earnings of 89 cents per share, according to Thomson Reuters I/B/E/S.
Titan will take a pre-tax charge of $4.2 million, or 12 cents per share, in the current quarter related to the job cuts and store closures.
Net loss attributable to shareholders was $387,000, or 2 cents per share, in the fourth quarter ended Jan. 31, compared with a profit of $15.4 million, or 73 cents per share, a year earlier.
Excluding items, Titan earned 35 cents per share, above the average analyst estimate of 20 cents per share.
Revenue fell to $708.6 million from $784.5 million. Analysts had expected revenue of $725.1 million.
Titan's shares were up 13.3 percent at $17.90 on the Nasdaq. They had fallen about 11 percent so far this year to Wednesday's close.