Bull of the Day: Tower (TOWR)


Auto sales are still hot and so is Tower International, Inc. (TOWR). This Zacks Rank #1 (Strong Buy) is expected to grow earnings by 29.2% this year.

Tower makes body-structure stampings, frames and other chassis structures as well as welded assemblies for nearly all the major automotive manufacturers in the world. Headquartered in Livonia, Michigan, it went IPO in 2010.

Beat Again in Q1

On Apr 30, Tower reported first quarter results and surprised on the Zacks Consensus by 6 cents. Earnings were $0.72 compared with the estimate of $0.66.

Since it went public in 2010, Tower has a tremendous track record for beating the Zacks Consensus, having never missed during that time. It's helped that auto sales bottomed during the Great Recession and have slowing been tracking to new highs.

Revenue grew 3% to $534 million year over year as the North American auto market remained hot. Higher customer production in North America and Europe more than made up for weakness in China and Brazil.

Raised Full Year Revenue Guidance

Even though it was just the first quarter, and anything could happen in the remainder of the year, Tower was still bullish about the full year outlook.

The better-than-expected first quarter gave a jolt to its confidence.

As a result, it raised its revenue guidance by $25 million to $2.175 billion.

Analysts Bullish Too

2014 is shaping up to be another solid year for the automakers and the companies that supply them.

Analysts expect Tower to grow its earnings by 27.2% in 2014 and another 14.1% in 2015.

Is it Too Late to Buy Tower?

Shares of Tower have soared to a multi-year high over the last 2 years.

But it's not too late to get on board.

The company still trades with an attractive forward P/E of just 11.9. That is well below the average of the S&P 500 of 17.

It also has a price-to-sales (P/S) ratio of just 0.3. A P/S ratio under 1.0 can mean a company is undervalued. The S&P 500 P/S ratio is averaging 2.6.

For investors looking for a way to play the hot auto industry, Tower is one company to keep on the short list.

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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

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