Titan International Inc

Titan International Inc. (NYSE: TWI) is an international industrial producer and supplier with customers all over the world. Agricultural, Earthmoving/Construction, and Consumer are the company's segments. Wheels, tires, and undercarriage systems and components are manufactured for use on different agricultural equipment by its Agricultural section. The Earthmoving/Construction section of the company makes wheels, tires, and undercarriage systems and components for various off-road vehicles. In Latin America, it makes bias truck tires, while in Russia, it makes light truck tires.

Key Highlights

• On Thursday, March 31, 2022, Titan International, Inc. announced a formal deal to sell its Australian wheel business to OTR Tires, a local top national tire, wheel, and service supplier. The transaction comprised roughly AUD 23 million in gross revenues and cash to be repatriated, as well as the assumption of all liabilities, including employee and leasing commitments.
• Titan International, Inc. and CNH Industrial N.V. have agreed to deliver agricultural wheels and tires produced in Titan's North America, South America, and European operations to different CNH Industrial production locations over a three-year period. As of March 24, 2022, the contract's worth in USD and raw material pricing levels was estimated to be over USD 400 million.
• Titan International, Inc. released its first-quarter results on May 3, 2022, for the period ending March 31, 2022.
• The first quarter of 2022 finished with net sales of USD 556.0 million, up 37.8% from the previous quarter of USD 403.5 million. The rise in net sales was driven by price/product mix and volume across all categories, with price having a bigger impact due to increased raw material prices and other inflationary market effects, such as freight. Unfavorable foreign currency translation of 4.4 percent, or USD 17.7 million, negated the rise in net sales.
• The first quarter of 2022 finished with a gross profit of USD 86.7 million, up from USD 53.3 million in the prior-year period. For the quarter, the gross margin was 15.6 percent of net sales, compared to 13.2 percent of net sales in the prior-year period. Increases in net sales, as previously stated, drove the increase in gross profit and margin, which was largely due to productivity gains across all production sites.
• In the first quarter of 2022, income from operations was USD 44.7 million, or 8.0 percent of net sales, up from USD 14.2 million, or 3.5 percent of net sales, in the first quarter of 2021. Higher sales and improved gross profit margins were the main reasons for the rise in revenue.
• The Company had USD 98.1 million in total cash and cash equivalents at the end of the first quarter of 2022, comparable to USD 98.1 million on December 31, 2021. Long-term debt was USD 484.6 million on March 31, 2022, compared to USD 452.5 million on December 31, 2021. The rise in net debt in the first three months of 2022 was largely attributable to well-managed working capital investments to support company expansion, as well as USD 25 million in new borrowings to fund common stock repurchases.
• In the last 6 months the price of TWI stock has increased by 82.86%, with the current price corrected by 14.35% after making a 5-year high of USD 17.60. Price is above both short-term (50-day) SMA and long-term (200-day) SMA and has taken constant support from the short-term (50-day) SMA as can be seen from the price chart, so the next strong support for the price is around USD 14.

 One-year technical Price Chart (as of 10 May 2022). Source: REFINITIV, Analysis by Kalkine Group

Stock Recommendation

TWI's stock price has risen 84.56% in the past six months and is currently at the upper end of its 52-week range of USD 6.69 to USD 17.60. As can be seen in the technical chart, the price is expected to fall to its short-term SMA around USD 14 and any entry into the stock will be analyzed by looking at the price action at that support level.

Given the stock's considerable bullish price movement over the last year with short-term bearish momentum, financial results, and technical analysis, we propose a "Watch" rating on the stock at its closing price of USD 15.19 as of 10 May 2022.

Technical Analysis Summary

* Closing price as of May 10, 2022.

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.

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