Titan International, Inc. , a Zacks Rank #5 (Strong Sell) 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. They offer a broad range of different products that are manufactured in relatively short production runs to meet original equipment manufacturers' specifications and/or aftermarket customer requirements.
Recent Earnings Data
In TWI’s most recent earnings report, they significantly missed the Zacks consensus earnings estimate ($0.11 estimate vs. -$0.09 actual), but did beat the Zacks consensus revenue estimate. The company posted a +10% increase in net sales, but the net loss applicable to shareholders increased from -$5.2 million in Q2 16 to a net loss of -$10.3 million in Q2 17.
Issues Facing the Company
Declining gross margins due to increasing raw material costs (costs increased in all geographical areas) negatively impacted EPS in the second quarter. To combat the increase in raw material costs, management increased prices for their aftermarket original equipment manufacturer (OEM) contracts, which should contain some of the raw material costs. Also, the slowdown and lack of an overall recovery in agriculture is acting as a further headwind. Lastly, the second half of the year typically has a seasonal slowdown which will put further pressure on both the top and bottom lines.
Management’s Take
According to Paul Reitz, President and CEO, “The current quarter saw sequential gross margin improvement, up from 11.1 percent in the first quarter to 12.0 percent in the second. This improvement was in spite of significant raw material pricing headwinds that negatively impacted gross profit by approximately $11 million during the second quarter. Although we believe that raw material pricing has now stabilized, our OEM contracts in North America did not allow us to fully pass through these higher costs during the quarter. Because of these headwinds, we did not reach the gross margin level we experienced this quarter last year; however, with the increased pricing that has now taken place with the OEMs and the raw material price stabilization, we do not anticipate further negative impacts from raw material prices in the second half of this year.”
Price and Earnings Consensus Graph
As you can see in the graph below, the elevated cost for raw material, the implementation of their new enterprise resource system (ERP), and the negative seasonality of the second half of the year, has caused the stock price and future earnings estimates to decline as of late.
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Titan International, Inc. , a Zacks Rank #5 (Strong Sell) 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. They offer a broad range of different products that are manufactured in relatively short production runs to meet original equipment manufacturers' specifications and/or aftermarket customer requirements.
Recent Earnings Data
In TWI’s most recent earnings report, they significantly missed the Zacks consensus earnings estimate ($0.11 estimate vs. -$0.09 actual), but did beat the Zacks consensus revenue estimate. The company posted a +10% increase in net sales, but the net loss applicable to shareholders increased from -$5.2 million in Q2 16 to a net loss of -$10.3 million in Q2 17.
Issues Facing the Company
Declining gross margins due to increasing raw material costs (costs increased in all geographical areas) negatively impacted EPS in the second quarter. To combat the increase in raw material costs, management increased prices for their aftermarket original equipment manufacturer (OEM) contracts, which should contain some of the raw material costs. Also, the slowdown and lack of an overall recovery in agriculture is acting as a further headwind. Lastly, the second half of the year typically has a seasonal slowdown which will put further pressure on both the top and bottom lines.
Management’s Take
According to Paul Reitz, President and CEO, “The current quarter saw sequential gross margin improvement, up from 11.1 percent in the first quarter to 12.0 percent in the second. This improvement was in spite of significant raw material pricing headwinds that negatively impacted gross profit by approximately $11 million during the second quarter. Although we believe that raw material pricing has now stabilized, our OEM contracts in North America did not allow us to fully pass through these higher costs during the quarter. Because of these headwinds, we did not reach the gross margin level we experienced this quarter last year; however, with the increased pricing that has now taken place with the OEMs and the raw material price stabilization, we do not anticipate further negative impacts from raw material prices in the second half of this year.”
Price and Earnings Consensus Graph
As you can see in the graph below, the elevated cost for raw material, the implementation of their new enterprise resource system (ERP), and the negative seasonality of the second half of the year, has caused the stock price and future earnings estimates to decline as of late.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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