Deere & Company (DE), Titan Machinery Inc. (TITN), CNH Global NV (ADR) (CNH): One Big Reason Why This Stock May Never Really Recover

Naturally, CNH’s equipment doesn’t command the attention that a Deere tractor or a Caterpillar loader has. Consequently, as fellow Fool Dan Caplinger rightly pointed out, Titan Machinery Inc. (NASDAQ:TITN) faces an uphill task selling equipment even in its primary market.

The real challenge
To that end, Titan is doing surprisingly well given the challenges. Its last-quarter revenue jumped 19% year over year. More importantly, same-store sales improved 9.6 %.

Unfortunately, Titan lowered its full-year guidance as challenges continue to intensify in the agriculture as well as construction segments. While it is an industrywide problem, things are particularly difficult for Titan because 52% of the prevented planting acres for corn and soybeans this year unluckily fall under Titan’s region of operations. That’s a huge number, because prevented planting refers to those areas that farmers could not plant this season because of a natural disaster. That means lower production in those areas and hence lower farm income and demand for farm equipment.

Despite the headwind, Titan expects an 11% growth on its full-year top line at the higher end of its projection. That’s commendable, but I wished Titan could convert those incremental sales into profits. Unfortunately, that doesn’t seem to be the case — Titan expects its net income for the full year to be at least 24% lower than last year. If things get really bad, profits could slump 40% year over year.

The Foolish bottom line
So now you know how costly Titan’s limited footprint can be, and that’s also the major reason why its shares will perhaps find it difficult to attract investors in hordes.

The company is losing out on the huge mechanization opportunity that’s emerging in the developing markets even as competition intensifies in the domestic market. So I certainly don’t classify Titan as a growth stock.

The article 1 Big Reason Why This Stock May Never Really Recover originally appeared on Fool.com and is written by Neha Chamaria.

Fool contributor Neha Chamaria has no position in any stocks mentioned, and neither does The Motley Fool.

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