For Immediate Release
Chicago, IL – June 28, 2013 – Zacks Equity Research highlights Ryland Group Inc. (RYL-Free Report) as the Bull of the Day and Titan International Inc. (TWI-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on the The Travelers Companies, Inc. (TRV-Free Report), The Hanover Insurance Group Inc. (THG-Free Report) and Hilltop Holdings Inc. (HTH-Free Report).
Here is a synopsis of all five stocks:
Is it nuts to buy a homebuilder stock right now? Shares of Ryland Group Inc. (RYL-Free Report) sold off after mortgage rates spiked on fears of Fed tapering, but have since rebounded off of recent lows. It isn't for the faint of heart. Yet this Zacks Rank #1 (Strong Buy) has excellent fundamentals with double digit earnings growth and a forward P/E below the market average.
Ryland is one of the largest homebuilders in the United States. It operates in 14 states, including many of the key hot markets like Southern California and the Washington DC metro area.
Ryland has also been aggressively buying land. Over the last 2 years it has spent nearly $1 billion buying land, including in the lucrative Dallas market.
If there was any doubt about the housing recovery, the first quarter dispelled it. On Apr 24, Ryland reported first quarter 2013 revenue had jumped 73.6% from a year ago. More importantly, new orders jumped 54.4% to 2,051 units from 1,328 units a year ago.
Backlog also rose 57.2% to 3,135 units from 1,994 units as of March 31, 2012. The average backlog price tells you how hot it is, as that rose to $289,000 from $250,000 a year ago.
High tire inventories in the machinery and mining industries is biting the tire manufacturers. Titan International Inc. (TWI-Free Report) recently announced it would lower 2013 guidance as a result. This Zacks Rank #5 (Strong Sell) is expected to see earnings decline by over 12% in 2013.
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 the agriculture sector and the commodities industry has cooled. On June 7, in a press release, CEO Maurice Taylor provided commentary regarding the first five months of 2013 and discussed the build-up in tire inventories.
He emphasized that there is no tire shortage. On the contrary, millions of dollars in tires have been dropped in the aftermarket from the OEM's in the farm and construction industries. Those tires have now been released.
Titan sees this a a bump in the road for a few months until things get back to normal.
The selling price of Titan's tires is also going down because its material cost has been dropping.
Titan will be adjusting its December 2012 full year guidance, but it wanted to gather further information from the mining companies and their inventories before doing so.
Travelers Upgraded to a Buy
Zacks Investment Research upgraded The Travelers Companies, Inc. (TRV-Free Report) to a Zacks Rank #2 (Buy).
Why the Upgrade?
Strong first-quarter results as well as the company’s plan to acquire The Dominion of Canada General Insurance Company have led to an uptrend in Travelers’ earnings estimates.
Additionally, this property and casualty insurer delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 136.4%. The long-term expected earnings growth rate for this stock is 9%.
On Jun 10, Travelers proposed the acquisition of The Dominion of Canada General Insurance Company from E-L Financial Corporation Limited in an effort to strengthen its foothold in Canada. The proposed acquisition is a testimony of Travelers’ prudent investment strategy, wherein the company strives to expand in attractive and growing markets outside the United States.
Earlier on Apr 23, Travelers reported earnings of $2.31 per share in the first quarter of 2013, surpassing the Zacks Consensus Estimate of $1.99 per share and $2.01 earned in the year-ago quarter. Favorable results came on the back of higher underwriting margins and lower catastrophe losses, which more-than-offset lower net investment income and lower net favorable prior-year reserve development.
To further aid its cause, A.M. Best upgraded the outlook of Travelers and most of its subsidiaries to positive from stable in May.
The Zacks Consensus Estimate for 2013 increased 0.7% to $7.52 per share as 3 of 18 estimates were revised higher over the last 60 days. For 2014, 5 of 18 estimates were revised higher over the same period, lifting the Zacks Consensus Estimate by 1.8% to $7.74 per share.
Other Stocks to Consider
Property and casualty insurers The Hanover Insurance Group Inc. (THG-Free Report) and Hilltop Holdings Inc. (HTH-Free Report) carry favorable Zacks Rank #1 (Strong Buy) and are worth considering.
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