Titan mauled by bearish report
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform – Bull – or underperform – Bear – the markets over the next three to six months. In a move that may give ‘The Grizz’ reason to growl, on 22 March Zacks Equity Research named Titan International its ‘Bear of the Day.’
In his report, Zacks senior stocks strategist Kevin Cook notes that the industrial sector has been “hot” this year and always a percent or two ahead of the broad market. “The reasons for optimism have been sound, from a turn-around in the Chinese economy to the US housing recovery gaining steam,” he writes. “But that optimism may be cooling off and we need look no further than two big name equipment manufacturers to see it unfolding: Caterpillar and Deere.” Cook opines that the machinery segment may be slowing down, and Titan International could be “in the direct line of fire” of this.
“The mining industry, from metals to iron ore, has also seen earnings and outlooks take a hit recently, with names like Cliffs Natural Resources and Joy Global being sold as estimates soften,” adds Cook. “The gold miners are currently one of the lowest ranked industry groups in Zacks classification of 265 industries.”
On 25 February, Titan International reported record annual results for 2012. However, Cook says the “hiccup in Titan’s growth outlook” had been foreseen by the analysts since early this year. “And missing the fourth quarter consensus EPS estimate of 47 cents by 80 per cent didn’t help,” he adds. Since the release of this earnings report, the 2013 Zacks Consensus Estimate for Titan International has dropped by 10.4 per cent to $2.41 per share, while that for 2014 plummeted 16.6 per cent to $2.75 per share.
“It’s worth mentioning the record revenue picture here too,” Cook points out. “Revenue of $493.6 million represented a 22.5 per cent improvement over the year-ago quarter. The impact was, however, negated by a 28.4 per cent increase in cost of sales that led to a 12.0 per cent fall in gross profit, and a big drop from the year-ago quarter’s 37 cents EPS.”
Cook writes that “decreasing earnings estimates together with a mixed bag of both positive and negative earnings surprise for the past year – producing an average of miss of -9.6 per cent – raises skepticism over Titan International’s performance in the quarters ahead.” He concludes that “Titan is still projected by some analysts to have mid-teens earnings and sales growth. But until the estimate picture stabilises, it’s probably best to stand aside.”
The Zack’s report can be read here.
Related news:
Comments