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Factors That Make Titan International (TWI) a Lucrative Bet

Titan International, Inc. TWI is benefiting from solid demand and robust segmental performances. Rising agricultural commodity prices and the consequent improvement in farmer income, along with the need to replace old equipment are expected to support the Agricultural segment’s performance. TWI will also gain from the ramp-up in infrastructure spending in the United States.

TWI currently has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.

Solid Q3 Results: The company witnessed an18% year-over-year increase in net sales to $531 million in the third quarter of 2022 aided by strong performance in its segments, volume and pricing gains. This marked the strongest third-quarter sales performance in its history. Adjusted EBITDA was $61 million in the said quarter, up 74% from last year’s tally aided by higher sales and improved operating leverage in its production facilities.  Cost reduction and productivity initiatives undertaken by TWI also contributed to the improvement in profits. Earnings were 54 cents compared to the 17 cents reported in the third quarter of 2021.

Upbeat Outlook:  Backed by the performance so far this year,TWI expects results to be near the high end of its previously stated guided range. Titan International had earlier expected 2022 sales to be $2.2 billion. The company had reported sales of $1.78 billion in 2021. Adjusted EBITDA range was between $240 million and $250 million for the year compared with $135 million in 2021. Overall, the year 2022 is emerging as the strongest year in TWI’s history. This positive momentum is expected to continue in 2023 as well.

Positive Growth Expectations: The Zacks Consensus Estimate for earnings for both 2022 and 2023 has moved up 2% over the past 30 days. The estimate for 2022 earnings currently stands at $2.22, which suggests a surge of 161% from the 2021 figure. The same for 2023 stands at $2.34, indicating year-over-year growth of 5.6%.

Impressive Surprise History: TWI has a trailing four-quarter earnings surprise of 49.6%, on average.

Solid ROE: TWI’s superior return on equity (ROE) is indicative of its growth potential. Titan International’s ROE currently stands at 49.9%, higher than the industry’s 27.7%. This indicates efficiency in using shareholders’ funds and the ability to generate profit with minimum capital usage.

Strong Demand in Markets

Titan International’s Agricultural segment continues to benefit from increased commodity prices and improved farmer income. The need to replace an aging large equipment fleet and replenish lower equipment inventory levels is also working in its favor. These trends are expected to boost the segment’s results next year as well.

The Consumer segment is steadily witnessing higher volumes in relation to general market improvements. Recovery in construction markets has been driving the Earthmoving/Construction segment’s performance for a while. The ramp-up in infrastructure spending in the United States is expected to act as a significant catalyst in the days ahead.

Pricing actions undertaken to offset rising raw material costs and savings from productivity improvements across all production facilities are expected to contribute to TWI’s earnings growth.

Price Performance

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Zacks Investment Research

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Titan International’s stock has surged 104.9% in a year’s time against the industry’s growth of 25.8%.

Other Stocks to Consider

Some other top-ranked stocks in the Industrial Products sector are Enerpac Tool Group EPAC, Hubbell HUBB and W.W. Grainger GWW. While EPAC and HUBB sport a Zacks Rank of 1, GWW holds a Zacks Rank of 2  at present.

Enerpac Tool Group has an earnings growth estimate of 44.6% for the current year. The estimates have been unchanged over the past 30 days. EPAC’s shares have rallied 14.6% over the year. It has a trailing four-quarter surprise of 3.4%, on average.
Hubbell has an average trailing four-quarter earnings surprise of 10.6%. The stock has gained 28.4% in the past year. HUBB’s earnings growth estimate for fiscal 2022 is 6.7%. The consensus mark has been revised 4.8% upward in the past 30 days.
W.W. Grainger has a trailing four-quarter surprise of 10.1%, on average. The Zacks Consensus Estimate for GWW’s 2022 earnings stands at 16.6% growth from the year-ago reported number. The consensus estimate has increased 4.1% over the past 30 days. The stock has jumped 22% in the past year.

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