For immediate release
Chicago, IL – February 14, 2022 – Today Zacks Investment Ideas Presents: Deere & Co. DE, Titan International Inc. TWI and AGCO Corp. AGCO.
3 Zacks ranked ‘buy’ stocks top of the pack in February
It was a rocky start to 2022 as the market pulled back significantly in January and now threatens to retest the lows of that move as we enter the second half of February. Thursday’s price action was snappy as the market opened sharply lower, pared those early afternoon losses, to end near where it started the day.
The preliminary reading of the University of Michigan Consumer Confidence Index is due out at 10am this morning. Sentiment is expected to remain subdued this month as consumers continue to feel the effects of rising inflation and ongoing supply chain shortages. Estimates call for a reading of 67.0, up from 67.2 from the previous reading.
As we try to navigate a volatile and uncertain market, investors may be tempted to pull the trigger and buy beat stocks because they seem “cheap”. The problem with this approach is that cheap stocks normally trade low for a reason, and they will likely get cheaper before they potentially turn around. A much more cautious approach is to identify stocks that are leading in the current market environment and wait for the appropriate entry points to present themselves.
On that note, we’ll analyze three stocks that are all rated Zacks #2 Buy or better and have held up well in recent volatility. All three stocks are part of the Zacks Industrials sector, which currently ranks in the top 44% of all Zacks-ranked sectors. Digging a little deeper, these companies are part of the Zacks Manufacturing – Farm Equipment industry group, which ranks in the top 29% of all Zacks-ranked industries.
It’s no secret that investing in stocks located in major sectors and industries can boost portfolio returns. This phenomenon has been well studied and documented, illustrating that approximately half of a stock’s future price appreciation is due to its industry group. Our own proprietary research has shown that stocks in the top 50% of Zacks-ranked industries have outperformed the bottom 50% by a factor of more than 2 to 1.
To that end, let’s look at three stocks that sport this favorable combination of sector and industry.
Deere & Co.
Deere & Co. is an American manufacturer of construction, agricultural, engine, forestry and lawn care equipment. The Company operates through four segments: Production and Precision Agriculture, Smallholder Agriculture and Turf, Construction and Forestry, and Financial Services. The company is well known for its tractors, mowing equipment, excavators, milling machines and sports turf maintenance applications. Deere was founded in 1837 and is headquartered in Moline, Illinois.
DE benefits from advances in technology and agricultural mechanization, which expand existing markets and create new ones in which the company can thrive. construction. As commodity prices continue to soar, farmers will fuel demand for the company’s farm equipment. The company’s revenue trends are impressive, and sales are expected to climb 18.21% this year to $46.97 billion.
DE is 78and the largest company in the S&P 500, with a market capitalization of $121.17 billion. Earnings surprises are a bright spot for the machinery maker as DE has beaten estimates in every quarter for the past two years. The company recently reported fourth-quarter EPS of $4.12, delivering a +7.85% surprise from the consensus estimate of $3.82. Over the past four quarters, DE has posted an average surprise profit of +33.57%. Stocks have risen at a steady pace, rising nearly 27% over the past year.
What the Zacks Model Reveals
The Zacks Earnings ESP (Expected Surprise Prediction) seeks to find companies that have recently experienced positive earnings estimate revision activity. This more recent information can be a better predictor of the future and give investors a head start during earnings season. In fact, combining the Zacks No. 3 or higher ranking with a positive earnings ESP, stocks produced a positive earnings surprise 70% of the time according to our 10-year backtest.
DE is a Zacks Rank #2 (Buy) and boasts an impressive +17.33% Earnings ESP. Another beat could be in the cards when the company reports next week on February 18.and.
Analysts expect growth to continue in 2022 and beyond. The Zacks consensus estimate for 2022 EPS is $22.21, which translates to 16.96% growth over last year.
Titan International, Inc.
Titan International is a global manufacturer of wheels, tires, undercarriages and components for all-terrain vehicles. The company operates in North America, Europe, Latin America, the Middle East, Africa and Russia. TWI offers components for agricultural equipment including tractors, skidders, plows and irrigation equipment. Titan International was founded in 1890 and is based in Quincy, IL.
Zacks No. 2 stock (buy), TWI has exceeded earnings estimates in each of the past six quarters. The company posted a four-quarter average profit of +32.09%, supporting the stock’s 42.65% rise over the past year. Despite the company’s stellar performance, TWI trades at a forward P/E of just 11.41. The manufacturer is relatively undervalued compared to the average for its sector (16.55).
For the last quarter, analysts forecast EPS of $0.17, which would represent a 270% growth compared to the fourth quarter of 2020. TWI is expected to report results on March 3.rd. Analysts have raised their 2022 EPS estimates by 13.25% over the past 60 days. The Zacks consensus estimate now stands at $0.94, an implied growth rate of 48.41% year over year.
AGCO Corp. is a global manufacturer and distributor of agricultural equipment and related spare parts. The company offers tractors, self-loading trailers, spreaders, mowers, ventilation and watering systems and cultivators. AGCO markets its products under the Challenger, Fendt, Massy Ferguson and Valtra brands through a network of independent dealers and distributors. AGCO was founded in 1990 and is based in Duluth, GA.
AGCO is a Zacks Rank #1 (Strong Buy) and has exceeded earnings estimates in each of the past eight quarters. The company recently reported fourth quarter EPS of $3.08 at the start of the month, a surprise +79.07% from the consensus of $1.72. AGCO averages a positive surprise of 56.65% over the past four quarters. The stock is up better than 12% this year.
AGCO expects earnings growth to continue in the current year driven by strong end-market demand and a strong agricultural outlook. The company is relatively undervalued, trading at a PER of 11.35, which is significantly below the industry average (16.55).
Analysts covering AGCO have raised their 2022 EPS estimates by 10.59% over the past 60 days. The Zacks ’22 consensus estimate is now $11.49, reflecting growth of 10.69% over last year. The picture looks even brighter for 2023, with analysts anticipating EPS growth of 22.72% to $14.10.
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Past performance is not indicative of future results. The potential for loss is inherent in any investment. This document is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold any security. No recommendation or advice is given as to whether any investment is suitable for any particular investor. It should not be assumed that investments in the securities, companies, sectors or markets identified and described have been or will be profitable. All information is current as of the date hereof and is subject to change without notice. The views or opinions expressed may not reflect those of the company as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management of securities. These returns come from hypothetical portfolios composed of stocks with Zacks Rank = 1 that have been rebalanced monthly without transaction fees. These are not the returns of actual stock portfolios. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for more information on the performance figures displayed in this press release.
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