Caterpillar, Inc. (CAT) recently lowered profit and growth forecasts due to global economic weakness. It appears that the mining industry is particularly at risk of a major slowdown since commodities like coal and iron ore have plunged in the past few months. Economic weakness in China is also limiting demand for all sorts of heavy equipment, especially in the construction and mining industry. Caterpillar previously had expected earnings to range between $15 to $20 in 2015, but that has been reduced to $12 to $18 per share. As a bellwether for the heavy equipment industry, when Caterpillar sees weakness, it is likely to spill over to other companies like Deere and Company (DE) as well as companies that supply the industry. Here is a closer look at one company that is likely to be impacted by the same type of weakness that Caterpillar is seeing:
Titan International, Inc. (TWI) is a leading maker of farm and heavy equipment tires that are used in the construction, forestry and mining industries. It sells tires under the Titan and Goodyear Farm Tires brands. Many of its tires are used on the type of farm and heavy equipment that is made by companies like Caterpillar. In fact, Titan's customers include companies like John Deere, Case New Holland, Kubota (KUB) and AGCO (AGCO), as well as individuals and businesses that purchase Titan and Goodyear Farm tires through local independent dealers.
With Caterpillar seeing the need to reduce growth and profit forecasts, it seems logical that companies like Titan may also soon be impacted by the slowdown, particularly in the mining and construction industry.
A few days ago, Zacks Investment Research downgraded shares of Titan International to a strong sell rating, and the stock has been trending lower. In the last major sell-off of this stock, the shares dropped to $12.97 on October 4, 2011. With industry conditions looking weaker, and the stock in a downtrend, it could make sense for
investors to avoid the shares, for now. The stock might find support around $13 once again, and if it does, it could be the time to start buying.
Here are some key points for CAT:
Current share price: $88.59
The 52-week range is $67.54 to $116.95
Earnings estimates for 2012: $9.61 per share
Earnings estimates for 2013: $10.51 per share
Annual dividend: $2.08 per share, which yields 2.3%
Here are some key points for TWI:
Current share price: $17.82
The 52-week range is $12.97 to $29.95
Earnings estimates for 2012: $2.35 per share
Earnings estimates for 2013: $2.78 per share
Annual dividend: 2 cents per share, which yields .1%
Data sourced from Yahoo Finance. No guarantees or representations are made.
Disclaimer: Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.