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Tata Motors Ltd. (TTM): Zacks Rank Buy

Jared Levy

Tata Motors (TTM)

They may have a funny name, but they are a serious  company. 

Watching the Q2 earnings season unfold, there is strength coming from transportation.  Here in the U.S., car and truck manufacturers, retailers and even shipping companies are delivering strong results on average.

Tata Motors is a slightly different company when compared to the typical US automaker.  With roots going all the way back to 1868, they are well known in India for producing no-frills economy cars for the masses, their “Nano” model is considered “The Peoples Car” of India. 

Around the globe they offer more economy and upscale brands of automobiles and provide transport and technology solutions for governments.

TTM is more of a conglomerate than just an autos company.  The Tata group comprises over 100 companies in seven sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. Tata has operations in more than 80 countries and exports products and services to 85 countries all together.  The company’s major components are Tata Steel, Tata Motors, Tata Consultancy Services (:TCS), Tata Power, Tata Chemicals, Tata Global Beverages, Tata Teleservices, Titan, Tata Communications and Indian Hotels.

Tata Steel is one of the top ten steelmakers and Tata Motors is one of the top five commercial vehicle manufacturers in the world. TCS is a leading global software company and Tata Global Beverages is the second-largest player in tea in the world. If that wasn’t enough Tata Chemicals is the world's second-largest manufacturer of soda ash and Tata Communications is one of the world's largest wholesale voice carriers.

Did I mention that they also own Land Rover and Jaguar?

Recent Developments TTM recently signed a contract to co-develop a new generation of armored troop carriers with Malaysian conglomerate DRB-HICOM which will be sold the Malaysian military as well as other customers.  Tata vehicles are in use by armies around the Indian ocean and Africa.   Tata is also marketing certain models of the Land Rover brand as a durable off road vehicle

Speaking of, sales of Land Rovers, Ranger Rovers and Jaguars jumped 60% in China in 2011, and last month, the company signed a deal with China's Chery Automobile to manufacture and sell luxury cars in China

Tata’s diversified exposure to industrial, commercial and consumer products really makes it a global growth play.  Similar to GE, it will respond as a barometer to global economic health.

TTM became a Zacks Rank 1 strong buy on April 25th.

Financials TTM is a large-cap (16.5 billion) company based on the value of thier outstanding ADRs.  They currently trade a forward 12 month P/E of roughly 7.

On February 14th, the conglomerate reported an increase of 44% in net quarter over quarter revenue and an 18% jump in revenue growth for Q3 FY 2012 versus the same period last year. 

Because TTM is foreign company that trades as an ADR, analyst coverage is light.  TTM is expected to earn $3.51USD in FY2012 according to the Zacks Consensus Estimate.  They will report earnings on May 24th.

Market Performance & Technicals Tata’s stock price has almost doubled year to date, due both in part to improvements in the U.S. and global outlook, but also on the company’s strong performance and increase in sales volume even though it is still facing challenges in Europe.

Surprisingly, volume is heavy in the stock, although it tends to “gap” in US markets because of responses to the much earlier opening of trading in India.  The stock is currently above its 50 and 200 day moving averages, which stands at $27.85 and $21.05 respectively.  TTM has remained above both averages for the better part of 2012, but because of a recent slowdown in appreciation it is getting close to the support of the 50 day.  I think that level will be key as it coincides with other key support points over the past month or so.

TTM has exceeded the S&P 500’s performance by 15% in the past year and over 18% in the past 3 months.  Recent momentum has slowed in the past 30 days in which TTM only leads the index by about 3%.    

 Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.


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