Titan Machinery Lowers Fiscal Year 2025 Modeling Assumptions

Case IH dealership group Titan Machinery released preliminary 2Q results for fiscal 2025 on Aug. 14, ahead of the quarter close on Aug. 31. Revenue for the quarter is expected to be about $643 million, flat vs. the same period of fiscal year 2024. 

Titan said this reflects lower than expected equipment revenues due to incrementally softer retail demand. 

"Commodity prices for most key cash crops in our footprint have steadily declined since the beginning of the year and retreated by an additional 10-20% in the second quarter,” said Titan CEO BJ Knutson. “As we navigate the current contractionary cycle, we are focused on reducing inventory levels, particularly used equipment, implementing cost controls and supporting our customer care strategy to grow our parts and service businesses.” 

“The biggest issue is equipment margin, now expected near historical lows, this is occurring in the early innings of attempted inventory destocking; to us this means the stock is still not de-risked with pressure (margin, EPS) extending through FY26,” said Baird analyst Mircea (Mig) Dobre in a note to investors. 

2025 Modeling. In response to the preliminary results for 2Q, Titan updated its full year fiscal 2025 modeling assumptions. “Retail demand has softened further over the last several months, and our updated guidance reflects demand that remains at these subdued levels,” said Titan CFO Bo Larsen. “We continue to prioritize managing inventory down to targeted levels, and we expect this lower demand environment will require further reduction in equipment margin versus our previous assumptions.”

Larsen said Titan now anticipates margins may approach the historical lows the dealership realized in fiscal years 2016 and 2017. 

“We have argued for more than a year that TITN will experience meaningful margin compression as the over-earning experienced in a tight equipment supply environment (FY23, FY24) is reversed…this cut is consistent with our view but nonetheless surprising in terms of the magnitude,” Dobre said. “What is concerning is the fact that equipment margins are already expected toward decade lows before any real progress has been made in destocking inventory and while meaningfully lower demand volumes are yet to flow through the P&L.”