Wednesday’s 1% decline in Wal-Mart Stores, Inc. (NYSE:WMT) was just one of only a handful of stocks among the Dow Jones Industrial Average that fell as the market took leave of its senses and raced to yet newer highs. The index surged 129 points to close at 14,802, and has me fearful of a big crash coming.
While the retail king didn’t crash and burn, the pullback in its stock wasn’t so surprising, because it’s also been hitting new lofty levels. Wal-Mart Stores, Inc. (NYSE:WMT)’s fourth-quarter earnings report in February was much stronger than everyone anticipated and helped fuel the current rally in its shares as consolidated revenues jumped almost 6% to $122 billion and comparable traffic and same-store sales were both strong.
Yet Wal-Mart Stores, Inc. (NYSE:WMT)’s stock is up 14% year to date, and like the Dow itself, it’s a pace that can’t be maintained for extended periods of time. It might not pullback sharply, but one has to imagine it has plateaued and Wednesday’s’s drop may be the signal it’s reached its zenith for the moment.
Clash of the titans
Where Wal-Mart Stores, Inc. (NYSE:WMT) got a boost from its earnings, Titan Machinery Inc. (NASDAQ:TITN) was slashed as a result of its financial report as profits narrowed in the fourth quarter and it missed by a wide mark analyst expectations. Even though it beat top line estimates as revenues jumped 29% from the year-ago period, Titan Machinery Inc. (NASDAQ:TITN)’s per-share earnings came in at just $0.73, a $0.19 miss from what Wall Street was anticipating.
It sells a diverse line of agriculture and construction equipment and despite the former continuing to live up to expectations, the latter did not. A healthier looking homebuilder industry is masking an underlying economic malaise that Titan was unable to shake. And with its rental equipment business turning in weak numbers as well the entire company’s performance was dragged lower.
The dichotomy between the two segments would seem to represent what we’ve seen in the broader market where agriculture equipment powerhouse Deere & Company (NYSE:DE) beat analyst expectations in the first quarter as it said it strong, 5% growth throughout the year should be expected, while construction equipment leader Caterpillar Inc. (NYSE:CAT) had to cut jobs because of waning demand.
Titan’s 14% decline Wednesday just might represent a good time to buy in to its stock. Although the farming business might be enough to prop up a weaker construction arm, if housing can continue its comeback, Titan could surprise everyone in the end.