Ahead of the Bell: Titan Machinery

NEW YORK -- A Baird analyst on Wednesday reaffirmed his "Buy" rating for Titan Machinery Inc., saying that while the third quarter could prove to be tough, he's confident that the company is on track to meet its long-term profit expectations.

Robert McCarthy said drought conditions across the Midwest continue to pressure the pricing of the company's harvesting equipment, which could hurt its third-quarter results. But the pricing environment should improve in the fourth quarter, as farmers finish their harvests and start focusing on next year's planting and are benefiting from high crop prices and insurance payouts.

Meanwhile, the West Fargo, N.D.-based company should get a boost from higher equipment use rates that will boost demand for parts and services and grow its revenue from replacement parts into fiscal 2014. It also should benefit from the rebound in construction markets stemming from improved housing demand and a new two-year highway construction bill, and acquisition opportunities, he said.

Last month, Titan reported a lower-than-expected second-quarter profit, hurt by lower used equipment margins, increased price competition and a shift in sales mix away from the company's more profitable parts and service businesses.

It also cut its fiscal 2013 profit prediction, saying that its sales and profitability continued to be hurt by drought conditions in the Midwest.

Its shares finished at $20.53 on Tuesday. They have fallen 44 percent from their 52-week high of $36.92 in mid-April.