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Titan International (TWI) Up 62% YTD: What's Driving the Rally?

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Titan International’s (TWI - Free Report) shares have gained 61.9% so far this year. The appreciation has resulted in the leading global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products outperforming its industry’s rally of 11% in the same time frame. The S&P 500 has declined 14.6% in the same time frame.
 
Let’s take a look into the factors that are driving this Zacks Rank #1 (Strong Buy) stock. You can see the complete list of today’s Zacks #1 Rank stocks here.

What’s Working in TWI’s Favor?

Titan International kick-started 2022 with a solid first-quarter performance and provided an upbeat outlook for the year, backed by the ongoing demand trends and order levels. This contributed to the share rally.

Zacks Investment Research
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The company delivered first-quarter 2022 adjusted earnings per share (EPS) of 44 cents, which marked a solid improvement from earnings per share of 7 cents in the prior-year quarter. Revenues surged 37% year over year to $556 million — the highest quarterly sales since the second quarter of 2013. Adjusted EBITDA soared 116% year on year to $57 million. Adjusted EBITDA margin climbed to 10.2%, the strongest level in close to a decade.

The upbeat performance was driven by robust performance across all segments. Pricing actions undertaken to offset rising raw material costs and other inflationary impacts in the markets, including freight, as well as savings from productivity improvements across all production facilities contributed to earnings. The Agricultural segment has been benefiting from increased commodity prices, improved farmer income, replacement demand of an aging large equipment fleet, and lower equipment inventory levels. Improvements in global economic conditions and recovery in construction markets have been driving the Earthmoving/Construction segment’s performance. Meanwhile, the Consumer segment has been witnessing higher volumes related to general market improvements.

Titan International expects to deliver revenues of more than $2 billion in 2022. TWI had reported sales of $1.78 billion in 2021. The company expects an adjusted EBITDA of $200 million for the year, revised upward from the prior expectation of $175 million. Adjusted EBITDA was $135 million in 2021.

Rising agricultural commodity prices and the consequent improvement in farmer income, as well as the need to replace old equipment, will continue to support the Agricultural segment’s performance. The company will gain from the ramp-up in infrastructure spending in the United States.

Earnings estimates for TWI have been going up over the past month. The Zacks Consensus Estimate for 2022 has increased around 35%, while the same for 2023 has gone up 29%. The favorable estimate revisions instill investor confidence in the stock.

Other Stocks to Consider

Some other top-ranked stocks in the Industrial Products sector are Graphic Packaging Holding Company (GPK - Free Report) , Myers Industries (MYE - Free Report) and Packaging Corporation (PKG - Free Report) .  All of these stocks carry a Zacks Rank #1.

Graphic Packaging has an estimated earnings growth rate of 86.8% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 7.6%.

Graphic Packaging pulled off a trailing four-quarter earnings surprise of 7.2%, on average. The company’s shares have appreciated 6% so far this year.

Myers Industries has an expected earnings growth rate of 67% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 27% in the past 60 days.

MYE has a trailing four-quarter earnings surprise of 20.1%, on average. Myers Industries’ shares have gained 17% year-to-date.

Packaging Corporation has an expected earnings growth rate of 16.2% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 4.2% in the past 60 days.

PKG has a trailing four-quarter earnings surprise of 19.6%, on average. Packaging Corporation’s shares have increased 11% so far this year.