TWI Q2 Deep Dive: Tariffs, Demand Uncertainty, and Strategic Expansion Shape Outlook

Agricultural and farm machinery company Titan (NSYE:TWI) missed Wall Street’s revenue expectations in Q2 CY2025, with sales falling 13.4% year on year to $460.8 million. On the other hand, the company expects next quarter’s revenue to be around $462.5 million, close to analysts’ estimates. Its non-GAAP loss of $0.02 per share was $0.03 below analysts’ consensus estimates.

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StockStory’s Take

Titan International faced a challenging Q2, as the company’s revenue and adjusted earnings both came in below Wall Street expectations, prompting a negative market reaction. Management attributed the underperformance to ongoing market softness in the agricultural sector, lower equipment demand, and customer hesitancy driven by unclear interest rate and tariff environments. CEO Paul Reitz noted that, “buyers of equipment continue to take a wait-and-see approach,” highlighting that both OEMs and aftermarket customers were cautious due to macroeconomic uncertainty. The company also pointed to a significant drop in orders and lower operating leverage as key factors impacting margins during the quarter.

Looking ahead, Titan’s guidance reflects ongoing caution, with management expecting market conditions to remain largely unchanged in the near term. Executives cited continued inventory destocking by OEMs, delayed purchasing decisions among farmers, and uncertainty around trade policy as primary headwinds. However, the company is optimistic about a potential rebound if interest rates and tariffs stabilize, pointing to early signs of inventory restocking in the consumer segment. CFO David Martin stressed, “our financial condition does remain solid and I’m fully confident we’re putting ourselves in a position to accelerate future performance,” as Titan continues to focus on operational agility and strategic investments.

Key Insights from Management’s Remarks

Titan’s leadership identified several operational and strategic factors behind the quarter’s results, emphasizing a mix of external pressures and internal responses.

• Tariffs and trade policy effects: Management reported that uncertainty around tariffs led aftermarket customers to delay purchases, especially in the consumer segment. The company expects a more level playing field should trade policies stabilize, which could benefit Titan's U.S.-based manufacturing.
• Interest rate impact on demand: Elevated financing costs remain the top concern for customers, particularly farmers and equipment dealers. The company highlighted that interest rates are the main impediment to a pickup in large equipment purchasing and consumer discretionary spending.
• Inventory dynamics and order patterns: Titan experienced sharp drops in orders as OEMs adjusted to mismatches between inventory and retail demand. Management expects this "buy-as-you-need" behavior to persist until broader economic conditions improve, with some recent signs of inventory restocking.
• Strategic expansion in Brazil: The company announced a minority investment in Roderos, the second-largest agricultural wheel manufacturer in Brazil. This move is aimed at strengthening Titan's position in a key growth market, with a focus on integrated wheel and tire solutions for South America.
• Focus on product development and partnerships: Titan continues to invest in product development, including ongoing efforts with the Goodyear brand and expansion of its one-stop shop strategy, as well as building relationships in new market segments such as military equipment and third-party sourced products.

Drivers of Future Performance

Titan’s outlook for the coming quarters is shaped by persistent macroeconomic headwinds, stabilization efforts in key markets, and targeted strategic investments.

• Macroeconomic headwinds persist: Management anticipates continued softness in core markets due to high interest rates and unresolved trade policy. These factors are expected to suppress both OEM and aftermarket demand, particularly in North America and Europe.
• Inventory restocking and demand recovery: The company is observing early signs of inventory rebuilding in its consumer segment, which could support revenues if retail demand holds steady. However, management cautions that a broad-based recovery hinges on improved financing conditions and tariff clarity.
• Growth initiatives in emerging markets: Titan’s strategic partnership in Brazil is expected to open new opportunities in South America, leveraging local manufacturing and distribution to capture demand in both the agricultural and construction sectors. The impact of this investment will depend on the pace of integration and market adoption.

Catalysts in Upcoming Quarters

In upcoming quarters, our analysts are watching (1) whether inventory restocking trends in the consumer segment continue and expand to other markets, (2) the impact of any changes in U.S. or global trade policy—including tariff resolutions—on customer buying patterns, and (3) signs of improved demand as a result of potential interest rate cuts. We are also monitoring the integration and strategic benefits from the Roderos partnership in Brazil and the pace of new product initiatives, especially in targeted growth segments.

Titan International currently trades at $8.38, down from $9.09 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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