Bear of the Day: Titan International (TWI) - Bear of the Day
13 Novembre 2013 - 12:30PM
Zacks
Titan International Inc. (TWI) continues to suffer from a
build-up in tire inventory in the farm and construction industry
and weak pricing. This Zacks Rank #5 (Strong Sell) is expected to
see a 50% earnings decline in 2013 on tough market conditions.
Titan International supplies wheels, tires and
assemblies for off-highway equipment used in agriculture and
earthmoving/construction.
When agriculture and mining was booming, tire sales
were too. In 2011, the farmers took home record income and Titan's
earnings jumped 253%.
But excess inventory that has been dropped into the
aftermarket from the farm, construction and mining industries has
impacted pricing.
Another Big Miss in Q3
On Oct 29, Titan reported third quarter results and
missed for the fourth quarter in a row.
![](http://static.zacks.com/images/zacks/blogs/1384295426_scaled_425.jpg)
It was another big miss of 11 cents, or 44%.
Earnings were $0.14 compared to the Zacks Consensus of $0.25.
Gross profit fell to 12.6% of net sales, or $62.5
million, from 16.6% of sales, or $67.2 million, in the third
quarter of 2012.
Agriculture held steady, but earthmoving and
construction declined again. Continuing decreases in raw material
prices impacted margins.
Titan expects tire prices to drop through the end
of the year. The mining companies are also expected to drop their
tire inventory from 14 months to 6 months and then buy what they
use going forward at lower prices.
On the bright side, Titan expects the smaller
construction businesses to expand 20-25% in 2014 based on
information from the OEMs.
Full Year Estimates Lowered Again
The analysts continue to see weakness in 2013 and
are also unsettled about 2014.
5 estimates were lowered for 2013 since the report
pushing the Zacks Consensus down to $0.93 from $1.28. That is an
earnings decline of 50% as Titan made $1.93 in 2012.
The analysts expect a small rebound in 2014, but 5
estimates have also been cut in the last 30 days. The Zacks
Consensus has fallen to $1.05.
Shares Near 52-Week Low
Shares have sunk to near 52-week lows over the
prior five months as the news out of the company hasn't improved
with each quarterly report.
![](http://static.zacks.com/images/zacks/blogs/1384295588_scaled_425.jpg)
Still, it's not altogether "cheap" as it trades
with a forward P/E of 16.3 which puts it in line with the average
of the S&P 500.
Titan is expected to announce management goals for
2014 sales in the week of Dec 15. Stay tuned.
Right now, the farm machinery industry is a
difficult place for investors. It currently ranks 248 out of 265 in
the Zacks Industry Rank, or in the bottom 6.4%.
But if you must buy in this industry, AGCO
Corporation (AGCO) is a Zacks Rank #3 (Hold). It's not beholden
to the tire market as it makes the machinery itself.
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Tracey Ryniec is the Value Stock Strategist for Zacks.com.
She is also the Editor of the Turnaround Trader and Value Investor
services. You can follow her on twitter at @TraceyRyniec.
AGCO CORP (AGCO): Free Stock Analysis Report
TITAN INTL INC (TWI): Free Stock Analysis Report
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