Titan’s adjusted loss per share of $0.11 missed the Street by $0.05, despite revenue upside. Sales of $465 million were ahead of consensus of $408 million and our $425 million estimate. Both construction and agriculture sales beat our estimate, while international was in line. Construction same-store sales were up 24.4%, helping offset some of the weakness in agriculture.
Margins were lower than we expected across the board. Equipment gross margin of 8.3% drove part of the shortfall, leading to an overall gross margin of 16.3% compared with consensus of 16.9%. Weaker pricing likely weighed on gross margin. Operating expenses, including the restructuring cost, were slightly above our expectation. Titan continues to lose money in the construction and international segments, but construction headcount reductions are expected to improve profitability throughout the course of the year. The strong construction same-store sales increase was not enough to help the segment achieve breakeven levels, even excluding restructuring costs.
Inventories of $1.12 billion were up sequentially and year-over-year, and are still too high. Management had guided inventories to still be high in the first quarter. Adjusted operating cash flow for the quarter was $11 million and the company reiterated its target of $60 million to $80 million. Floorplan notes payable of about $800 million were $50 million higher sequentially.
The company’s loss per share according to GAAP was $0.20, including realignment costs. We calculate the company’s tangible book value per share to be $17.50 at the end of the quarter. Further weakness in operating conditions and changes to used equipment values are one of the biggest risks to the company’s book value.
Management reaffirmed its guidance for $0.70 to $1.00 in adjusted EPS and $1.95 billion to $2.15 billion in revenue. We continue to view the EPS guidance as aggressive because we see risk to margins based on weaker agriculture same-store sale and used equipment pricing. Last year, Titan Machinery lost $0.02 in its fiscal first quarter, before a sequential uptick in the second quarter. On the 8:30 a.m. ET earnings call, we will gain a better sense of earnings progression throughout the year and end-market conditions. We continue to believe that the guidance will be backend loaded and there is downside risk to estimates.
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