In a Nov. 15, 2021 research note from Baird, analysts Mircea (Mig) Dobre noted that Titan Machinery management highlighted core operating improvement during Baird’s 2021 Industrial Conference. Those improvements ranged from inventory management, cost reductions, footprint consolidation to a growing parts & service business resulting in near record profitability on mid-cycle sales levels, Dobre noted.
“Farmer sentiment is positive (more positive than the recent Purdue farmer sentiment survey would suggest), crop yields were better than expected across most of Titan’s footprint, while commodity prices remain strong driving equipment replacement demand and technology upgrades,” he said in the note.
According to Dobre, most of Titan’s model year 2022 equipment and production slots are already sold and the orderbook go out to September, with some orders already on the books for model year 2023.
Dobre noted, “Equipment availability has progressively gotten tighter (i.e., not a step change), management noted that they could be selling much more equipment if available. Proactive build of parts inventory has limited shortages (competitive advantage).
“Used equipment inventory remains tight, positive for pricing and margins. Precision ag take rates continue to increase as productivity improvements are easy to demonstrate. Construction segment targeting a 5% margin (or better) on $350 million of revenue. Current difficult supply-chain environment provides scale advantages and motivates smaller players to consider selling dealerships to TITN (M&A pipeline remains full).”