Titan International: Zacks’ Bear of the Day Play

Titan International (TWISnapshot Report) reported earnings and revenues on October 28, and they once again missed on both the top and bottom lines.  This is the seventh consecutive miss on both sides by this company.  Therefore, Titan International is back as the Bear of the Day for the third time this year.

 

Titan International is a global manufacturer of off-highway steel wheels and tires in the agricultural, earthmoving/construction and consumer markets.  Titan generally manufactures both wheels and tires for these markets and provides the value-added service of assembling the completed wheel-tire system.

Missing Estimates (Consistently)

For Q3 14, the Zacks Consensus Earnings Estimate was at $0.01, and Titan posted earnings of -$0.17 (-1,800% negative surprise).  Further, the Zacks Consensus Revenue Estimate was estimated at $468 million, yet Titan posted revenues of only $450 million, missing by 3.9%.

As you can see in the Price and EPS Surprise graph below, Titan has been consistently missing estimates over the past several quarters, and has therefore seen their stock price decline over that timeframe.

What is causing Titan to Miss?

Titan has been facing significant headwinds for the past few years, but the lack of demand for farm machinery is the biggest negative.  This puts Titans core operations and end-markets at risk.  Further, in the fourth quarter Titan has historically seen about a 10% decline in production due to seasonality.  Adding to the negative news, the companies orders are down double-digits for both year over year, and sequentially.  Also, the shutdown of the Amiens plant, closed down by Goodyear, has negatively impacted the top line due to lost sales (Titan had been attempting to acquire a portion of the plant since 2013).

Looking Forward

All this negative news, and poor performance has caused the Zacks Consensus Earnings Estimates to decline over the past 30 days.  Q4 14, FY 14, Q1 15, and FY 15 have all seen reductions in estimates.  Q4 14 declined from -$0.01 to -$0.06, FY 14 dropped from $0.12 to -$0.15, Q1 15 fell from $0.05 to $0.01, and FY 15 saw the floor drop out with estimates falling from $0.32 to -$0.02.

The chart below shows the Price and Consensus, and how much it has fallen over the past 2 years.

Bottom Line

With no respite in site till late Q1 15, Titan International will be floundering for the next several months.  Further, with strong headwinds via currency fluctuations, lack of demand for their products, and the negative seasonality of the fourth quarter has Titan in a very difficult situation.  Therefore, this stock has become the Bear of the Day for November 12, 2014

Other Stocks To Consider

If you are inclined to invest in the Machine Farm Equipment sector, you should look at Briggs & Stratt (BGGSnapshot Report) which is currently holds a Zacks Rank #1 (Strong Buy), or Alamo Group Inc. (ALGSnapshot Report) which currently holds a Zacks Rank #3 (Hold).

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