Friday, September 12, 2014

TITAN MACHINERY Lowers FY2015 EPS Guidance: $0.00-$0.30

Titan Machinery reported a loss for their third consecutive quarter on Tuesday morning that sent shares down to a new 4 year low @ $11.85, a price that it had previously traded at in March 2010.
Aside from lowering their net income guidance dramatically, the company also lowered their cash flow and sales outlook as well.

chart source: ( click chart to enlarge.

The stock has closed under $14 per share for 21 consecutive days and saw a brief spike yesterday after the CEO bought 90,000 shares @ 13.03. The trade in my opinion is insignificant in light of the most recent prior trade the CEO did when he  appeared on Jim Cramer's MAD MONEY  and touted TITAN MACHINERY's future. 30 days later DAVID MEYER SOLD 300,000 shares @ $27.80 and received proceeds of $8,340.00.00 and CEO Peter Christianson sold 200,000 shares $27.80 for proceeds of $5.56 million. (more on Hyping of Shares (Unrealistic Guidance) that Directors used to take advantage of Stock Sales can be found here)

In their FY2015 2nd quarter 10Q filed on Tuesday afternoon with the Securities and Exchange Commission the company stated that they realized that they had inflated their assets and understated their losses in their 1st quarter 10Q filed back in June. Although they previously reported an Earnings Per LOSS of ($0.20) for Q1, it came to their attention that had actually loss ($0.31) for the quarter. The company determined that the error on the loss of over 50% was immaterial and that they won't deem it necessary to Refile their FY2015 Q1 10Q. I am wondering if the SEC will think otherwise?
  •  "The incorrect classification of the VAT asset as a non-monetary asset coupled with the significant devaluation of the UAH resulted in an overstatement of the Company’s assets (Prepaid expenses and other) as of April 30, 2014 and an understatement of the Company’s loss (Interest income and other income (expense)) for the three months ended April 30, 2014. This correction increased the Company’s Net Loss Attributable to Titan Machinery Inc. by $2.3 million (from the previously reported $4.2 million to $6.5 million) and increased the diluted loss per share by $0.11 (from the previously reported $0.20 loss per share to a $0.31 loss per share). This correction is reflected in the accompanying unaudited Consolidated Statements of Operations for the six-month period ended July 31, 2014.

    Based on an evaluation of all relevant factors, the Company concluded that this correction was immaterial to the Company’s results for the three months ended April 30, 2014; therefore, the Company determined that an amendment of its previously filed Form 10-Q for the quarterly period ended April 30, 2014 was not necessary, and the correction will be reflected in future 10-K and 10-Q filings."

Wall Street Money Mangers and Brokerages Are Looking the Other Way

The trailing twelve months ending July 31,2014 Titan has total net income of $690,000 and the stock @$13 a share values the company at $275 million. (or a PE of 398 on ttm basis)

With FY 2015 EPS Guidance now at $0.00 to $0.30 per share , if use the mid range of $0.15 eps, the shares are currently trading at PE of nearly 100!

Why is there such a disconnect with the fundamentals of this underlying business and the price of its stock market valuation? I am seriously thinking that these shares may be being manipulated. One director on the board who is also a founder of the company is the general partner of an underwriting firm for the company and may know more about why shares trade at such a huge premium. 

Management of Titan can blame price of corn, the weak construction & agricultural economy,  poor farming, the unrest with their footprint in the UKRAINE, but I blame The company's poor financial condition on GREED AND RELATED PARTY TRANSACTIONS

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