CNH CNH Industrial NV

Titan International Inc. (TWI) continues to suffer from a build-up in tire inventory in the farm and construction industry. This Zacks Rank #5 (Strong Sell) is expected to see a double digit earnings decline in 2013 on tough market conditions.

Titan International supplies wheels, tires and assemblies for off-highway equipment used in agriculture and earthmoving/construction.

When agriculture and mining was booming, tire sales were too. In 2011, the farmers took home record income and Titan's earnings jumped 253%.

But excess inventory that has been dropped into the aftermarket from the farm, construction and mining industries has impacted pricing.

Titan Posts Big Second Quarter Earnings Miss

On July 24, Titan reported second quarter results and missed on the Zacks Consensus by 49%. Earnings were 24 cents compared to the Zacks Consensus Estimate of 47 cents.

It was Titan's third big miss in the a row even though it had warned on the year in June.

Sales rose 29.2% to $593.3 million but the North American construction market saw volumes decrease 25% due to soft construction trends.

Titan is scheduled to close on the acquisition of Voltyre-Prom, a Russian industrial and agriculture tire producer, no later than Sep 1, 2013. It's expected to increase Titan's reach into the CIS region.

Titan is expected to see record revenue in the second half of 2013 due to acquisitions but earnings estimates are still sliding due to tire market conditions.

4 estimates have been cut since the earnings report for 2013. The 2013 Zacks Consensus Estimate has fallen to $1.24 from $1.66 in the last month.

That is an earnings decline of 35.6% compared to 2012.

Shares Hit 52-Week Low

Titan sold off this summer on the guidance cut and the earnings miss. Shares recently hit 52-week lows.

With earnings estimates still on the decline, it's hard to tell if it's actually cheap or not. It trades with a forward P/E of 13.2.

For investors looking for agriculture and construction plays, you may want to consider CNH Global (CNH) which makes the machinery in both of those areas. It isn't beholden to the tire market as it makes the equipment itself. It is a Zacks Rank #2 (Buy).

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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

 
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