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Deere & Company (DE), Caterpillar Inc. (CAT): Could Titan Machinery Inc. (TITN) Earnings Save the Stock?

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Titan Machinery Inc. (NASDAQ:TITN) will release its quarterly report on Thursday, and the operator of stores selling construction and agricultural equipment has seen revenue climb substantially in recent quarters. Yet the coming Titan Machinery earnings report looks to be somewhat of a disappointment for investors, as falling net income could make some question the specialty retailer’s future prospects.

Titan Machinery Inc. (NASDAQ:TITN)

Titan Machinery Inc. (NASDAQ:TITN) posted large gains during the bull market from 2009 to 2012, more than quadrupling in price as growing interest in its products supported its business. But particularly in the past six months or so, Titan’s earnings prospects appear to have worsened even as sales in the U.S. have remained relatively strong. What explains the disconnect? Let’s take an early look at what’s been happening with Titan Machinery over the past quarter and what we’re likely to see in its report.

Stats on Titan Machinery

Analyst EPS Estimate $0.20
Change From Year-Ago EPS (20%)
Revenue Estimate $463.11 million
Change From Year-Ago Revenue 12.9%
Earnings Beats in Past Four Quarters 1

Source: Yahoo! Finance.

Why could Titan Machinery earnings fall this quarter?

In recent months, analysts have cut back on their views on Titan Machinery Inc. (NASDAQ:TITN) earnings, reducing July quarter estimates by $0.04 per share and slashing their projections for next fiscal year by double that amount. The stock has also reflected that weakness, falling nearly 15% since late May.

Titan Machinery came into the current quarter on a weak note, as the company’s stock plunged in late May after the company cut its preliminary sales guidance for its April quarter by more than 10%, reversing its original call for a healthy profit with a quarterly loss. Titan Machinery Inc. (NASDAQ:TITN) later blamed the sluggishness on a cold spring, which has since given way to better weather conditions that have many farmers much better off than they were during last year’s drought.

One worry that some investors have about Titan Machinery Inc. (NASDAQ:TITN) concerns its ties to CNH Global NV (ADR) (NYSE:CNH). Even though CNH has seen its equipment sales perform fairly well lately, the fact that Titan serves mostly domestic customers within the U.S. puts it head-to-head against dealers of popular products from Deere & Company (NYSE:DE) and Caterpillar Inc. (NYSE:CAT). Given that both Caterpillar Inc. (NYSE:CAT) and Deere & Company (NYSE:DE) arguably have better brand recognition among potential U.S. customers, Titan faces somewhat of an uphill battle selling its customers on CNH Global NV (ADR) (NYSE:CNH) equipment.

A big question for Titan is whether CNH’s pending merger with Fiat Industrial will have an impact on Titan’s sales. The combination could give Titan greater access to Fiat’s more extensive line of trucks and other specialized vehicles, boosting potential sales if the retailer can find customers seeking Fiat products.

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