Zacks Investment Research downgraded Titan International Inc. (TWI) to a Zacks Rank #5 (Strong Sell) on Dec 4, 2014. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of performing worse than the broader market.
Why the Downgrade?
Titan International reported weaker-than-expected results for third-quarter 2014 on Oct 28. Since then, the earnings estimates on the company have been revised downward, reflecting the disappointment. A brief discussion on the quarter’s results is provided below:
The company reported a loss of 17 cents per share, worse than the Zacks Consensus Estimate of earnings of one cent and the year-ago figure of 15 cents per share. Revenues declined 9.6% year over year due to an 8% fall in volumes and 7% negative price/mix impact, partially offset by a 5% gain from acquisitions. Gross margin fell 250 basis points to 10.1%. Selling, general and administrative expenses increased 6.6%, while research and development expenses climbed 3%.
Going forward, Titan International anticipates weak demand in North America and relatively stable demand in South America and Europe. Dismal performance in third-quarter 2014 as well as a weak outlook has made investors dubious about the company’s future prospects. In the last 60 days, the Zacks Consensus Estimate has decreased from earnings of 12 cents to loss of 15 cents for 2014 and from earnings of 43 cents per share to loss of 2 cents for 2015.
Other Stocks to Consider
Titan International currently has a $553 million market capitalization. Some better-ranked stocks in the machinery farm industry include Blount International Inc. (BLT), Alamo Group, Inc. (ALG) and Briggs & Stratton Corporation (BGG). All these stocks sport a Zacks Rank #1 (Strong Buy).
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