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Titan International (TWI) Up 31% YTD: What's Driving the Rally?

Titan International’s TWI shares have gained 31.5% so far this year. The rally has resulted in the leading global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products outperforming its industry’s rally of 12.6% in the same time frame. Meanwhile, the S&P 500 has declined 10.6% over the same period.
 


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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?

A strong fourth-quarter and full-year 2021 earnings performance and upbeat outlook have contributed to the rally in the company's shares. Titan International delivered fourth-quarter 2021 adjusted earnings per share (EPS) of 39 cents that beat the Zacks Consensus Estimate of 18 cents by a margin of 117%. The bottom-line figure also marked a turnaround from a loss per share of 10 cents reported in the prior-year quarter. Revenues increased 49% year over year to $488 million in the quarter, surpassing the Zacks Consensus Estimate of $442 million.

The strong performance was driven by higher volumes, stemming from increased demand across all segments, particularly agriculture. Pricing actions undertaken to offset rising raw material costs and other inflationary impacts in the markets, including freight, contributed to earnings. The Agricultural segment has been benefiting from strong demand across all geographic markets, as well as pricing actions. 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.

For the full-year 2021, Titan International reported an adjusted EPS of 85 cents against a loss of 55 cents reported in the prior year. Sales were up 41% year over year to $1.78 billion. Adjusted EBITDA was $135 million, nearly two and a half times than reported in 2020.

Titan International expects to deliver revenues of more than $2 billion in 2022. The company expects an adjusted EBITDA of $175 million for the year.

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 23%, while the same for 2023 has gone up 38%. The favorable estimate revisions instill investor confidence in the stock.

Other Stocks to Consider

Some other top-ranked stocks in the Industrial Products sector include Alcoa (AA), Tenaris TS and AGCO Corporation AGCO. While AA and TS sport a Zacks Rank #1, AGCO carries a Zacks Rank #2 (Buy) at present.

Alcoa has an expected earnings growth rate of 53.3% for fiscal 2022. The Zacks Consensus Estimate for fiscal year earnings has moved up 49% in the past 30 days.

Alcoa has a trailing four-quarter earnings surprise of 27.1%, on average. AA’s shares have appreciated 23.7% so far this year.

Tenaris has an estimated earnings growth rate of around 54.5% for 2022. In the past 30 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 25%.

Tenaris has a trailing four-quarter earnings surprise of 76.6%, on average. Its shares have appreciated 27% year-to-date.

AGCO has a projected earnings growth rate of 12.4% for the current year. The Zacks Consensus Estimate for 2022 earnings has moved north by 2% in the past 30 days.

AGCO has a trailing four-quarter earnings surprise of 56.6%, on average. AGCO shares have gained 9% so far this year.


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