Executive Summary / Key Takeaways

• Cyclical Margin Power: Titan has expanded gross margins by over 500 basis points since the 2019 trough (from 9% to 14.6% in 2024 and 15.2% in Q3 2025) despite production volumes remaining 20% below prior peaks, demonstrating structural cost discipline and pricing power that should drive significant operating leverage when demand recovers.

• "One Titan" Platform Transformation: The $312 million Carlstar acquisition has evolved TWI from a cyclical OEM supplier into a diversified aftermarket platform, with aftermarket revenue growing from 25% to 45% of sales and creating a "one-stop shop" for wheels, tires, and undercarriage that competitors cannot easily replicate.

• Manufacturing Moat in a Tariff World: With eight U.S. plants and a Brazilian wheel partnership, TWI's localized production footprint turns trade policy headwinds into competitive advantages, allowing the company to capture share from import-dependent rivals while mitigating supply chain risks for customers.

• 2026 Recovery Setup: Management's commentary points to a cyclical inflection in both agricultural and earthmoving markets, with Brazil acting as a leading indicator, dealer inventories normalizing, and interest rate cuts poised to unlock pent-up equipment demand, positioning TWI to benefit from both volume recovery and its enhanced margin structure.

Setting the Scene: The Off-Highway Specialist

Titan International, founded in 1890 and headquartered in West Chicago, Illinois, manufactures wheels, tires, and undercarriage systems for off-highway equipment. The company operates in three segments: agricultural (41% of year-to-date 2025 revenue), earthmoving/construction (31%), and consumer (28%). This focus on off-highway applications distinguishes TWI from passenger tire giants, creating a specialized niche where technical expertise and manufacturing scale matter more than brand advertising.

The off-highway equipment market is inherently cyclical, driven by farm incomes, infrastructure spending, and mining capital budgets. Titan's history reflects this volatility, with deep downturns testing operational resilience. The company's response has been to build manufacturing flexibility and expand its aftermarket presence, reducing dependence on new equipment sales. This strategic pivot accelerated with the February 2024 acquisition of Carlstar for $312 million, which added 17 facilities and diversified TWI into outdoor power equipment, power sports, and trailer markets.

Titan's competitive positioning rests on two pillars: manufacturing scale and integrated solutions. The company produces North America's largest agricultural wheel (54-inch diameter) and the world's largest earthmoving wheel (63-inch). More importantly, it offers complete wheel and tire assemblies, a "one-stop shop" approach that reduces OEM assembly time and creates switching costs. This matters because off-highway equipment manufacturers increasingly value suppliers who can deliver pre-assembled systems rather than discrete components.

The industry structure features large, diversified tire manufacturers (Michelin , Bridgestone , Goodyear ) competing with specialized players like TWI and India's Balkrishna Industries. While global giants benefit from scale, TWI's focused strategy allows faster adaptation to regional market conditions and customer-specific requirements. The company's long-standing Goodyear trademark license, spanning over two decades, provides brand recognition in agricultural markets while TWI's own Titan and Carlstar brands serve value-conscious segments.

Technology, Products, and Strategic Differentiation

Titan's product differentiation centers on specialized designs that cannot be mass-produced efficiently. The company's Low Sidewall (LSW) technology reduces soil compaction and improves equipment stability, delivering measurable yield improvements for farmers. Independent data shows LSW tires can pay back their premium in under a year for mid-size farms compared to conventional dual tires or tracks. This performance advantage translates into pricing power, as customers accept higher upfront costs for demonstrable ROI.

The R14 tire line and integrated wheel-tire assemblies represent additional technical moats. Building these products requires skilled labor and significant capital investment in manufacturing assets, creating barriers to entry for would-be competitors. Titan's eight U.S. plants and recent investment in Turkish capacity provide geographic flexibility that import-dependent rivals lack. This manufacturing footprint becomes particularly valuable in an era of trade policy uncertainty.

The Carlstar acquisition expanded TWI's technology portfolio into smaller equipment categories while strengthening its aftermarket distribution. The integration of 17 manufacturing and distribution facilities created the "One Titan platform," enabling cross-selling between legacy Titan and Carlstar product lines. This matters because it transforms TWI from a product vendor into a solutions provider, capturing more value per customer while building stickier relationships.

Titan's expanded Goodyear licensing agreement, which now includes light construction, industrial, ATV, lawn and garden, and golf tires, opens new growth vectors. Management emphasizes that developing these products takes time, with meaningful revenue contribution expected in 2026. The strategy leverages Goodyear's brand equity to penetrate segments where TWI previously lacked access, effectively buying market entry at a fraction of the cost of building new brands.

Financial Performance: Evidence of Structural Improvement

Titan's Q3 2025 results validate the margin expansion thesis. Consolidated gross margin reached 15.2%, up 210 basis points year-over-year, while adjusted EBITDA grew 45% to $30 million. This performance occurred despite revenue growing only 4%, demonstrating that margin improvement stems from structural factors rather than volume leverage alone. The agricultural segment led with 13.4% gross margin (up from 9.5% in Q3 2024), while the consumer segment delivered 23% margins driven by its 65% aftermarket mix.

The nine-month picture reveals cyclical headwinds, with agricultural revenue down 8.2% and earthmoving down 5.6%. However, the consumer segment grew 9.2%, and consolidated gross profit remained stable. This resilience highlights the effectiveness of TWI's diversification strategy: when OEM demand weakens, aftermarket sales provide a floor. The company's ability to maintain margins while absorbing a large acquisition and navigating a two-year agricultural downturn suggests permanent cost structure improvements.

Cash flow discipline has been exemplary. Q3 2025 generated $42 million in operating cash flow and $30 million in free cash flow, enabling net debt reduction to $373 million (3.7x EBITDA) from $391 million in Q2. Management targets a debt ratio below 3x EBITDA by year-end, down from 3.8x in Q1. This deleveraging provides flexibility to invest in growth when the cycle turns, unlike overleveraged competitors who must focus on survival.

Capital expenditure discipline complements the margin story. Nine-month capex of $36.8 million compares to $52.3 million in the prior year, reflecting management's focus on cash generation during the downturn. Full-year 2025 capex guidance of $50-55 million represents maintenance-level spending, preserving capacity while avoiding growth investments until demand signals clarify. This pragmatism ensures TWI emerges from the cycle with both financial strength and operational readiness.

Outlook and Execution: Positioning for the Upturn

Management's commentary points to a 2026 cyclical recovery. Paul Reitz notes that "all the indicators are that '26 will be an uptick" after a two-year agricultural downturn. Brazil serves as a leading indicator, with strong performance in both OEM and aftermarket channels. The country's agricultural economy benefits from robust grain exports to China and government support when needed, creating a stable demand base that TWI can leverage through its localized manufacturing.

Interest rate cuts represent a key catalyst. Reitz identifies rates as "that cloudy factor that's hanging out over making purchases," noting that Fed actions are "another net positive" that should spur equipment demand. As financing costs decline, farmers and construction companies who deferred purchases during the downturn are likely to return to the market. TWI's enhanced margin structure means each dollar of incremental revenue will flow more directly to operating income than in prior cycles.

The Rodaros partnership in Brazil exemplifies TWI's strategic approach. The initial 20% stake for $4 million, announced in Q2 2025 and closed in October, provides access to the second-largest agricultural wheel manufacturer in Brazil. This partnership enables integrated wheel-and-tire assemblies tailored to South American markets, extending TWI's "one-stop shop" advantage into a high-growth region. The investment uses local cash, avoiding currency repatriation issues while building a platform for regional leadership.

Goodyear brand expansion into new categories creates a multi-year growth driver. While management cautions that product development and testing mean "we'll see more of it in '26," the strategy positions TWI to capture premium pricing in adjacent markets. The combination of Goodyear's brand recognition and TWI's manufacturing flexibility creates a competitive moat that pure-play tire companies cannot easily replicate.

Risks: What Could Break the Thesis

Tariff policy presents both opportunity and risk. While TWI's U.S. manufacturing footprint allows it to benefit from import restrictions, management acknowledges "substantial uncertainties related to newly imposed tariffs." The consumer segment was "most directly impacted" as customers delayed restocking while awaiting tariff resolution. If trade policy shifts abruptly, TWI could face margin pressure from higher input costs or demand destruction from customer uncertainty.

Scale remains a structural disadvantage. Competitors like Michelin (MGDDY) and Bridgestone (BRDCY) have vastly larger R&D budgets and global distribution networks. While TWI's niche focus provides agility, it lacks bargaining power with raw material suppliers and cannot match the marketing reach of global brands. This becomes particularly critical during market share battles in downturns, when larger players can absorb losses that would cripple TWI's margins.

Cyclical timing risk is real. Management's 2026 recovery call depends on factors outside TWI's control: farm incomes, commodity prices, infrastructure spending, and interest rates. If the agricultural downturn extends to three years or if a recession delays construction projects, TWI's margin resilience will be tested. The company's 45% aftermarket mix provides a floor, but not a growth engine sufficient to offset prolonged OEM weakness.

Execution risk on the Carlstar integration persists. While management reports "good progress" on synergy capture, combining 17 facilities across four countries while maintaining customer relationships and product quality is operationally complex. Any missteps could erode the margin improvements TWI has achieved, particularly if integration costs prove higher than anticipated or if key Carlstar customers defect.

Competitive Context and Valuation

Titan trades at $8.62 per share with a market capitalization of $551 million. With net debt of $373 million, the enterprise value is approximately $924 million. This implies an EV/EBITDA multiple of 9.16x, which appears reasonable for a cyclical recovery story. Goodyear (GT) trades at similar EV/Revenue (0.59x) but with negative margins and strained balance sheet, highlighting TWI's relative operational strength. Michelin's premium valuation reflects automotive diversification that TWI lacks, but also comes with exposure to mature, low-growth markets.

The company's debt-to-equity ratio of 1.23x and net debt/EBITDA of 3.7x (improving toward <3x) position it conservatively versus leveraged peers. Return on assets of 0.59% and negative return on equity reflect cyclical trough conditions rather than structural issues. As volumes recover, operational leverage should drive these metrics toward historical norms.

Titan's book value of $8.91 per share and price-to-book of 0.97x suggest limited downside if the cycle deteriorates further. The absence of a dividend (0% payout ratio) reflects management's focus on debt reduction and growth investment during the downturn. With $205 million in cash ($181 million held internationally) and $57.6 million available on its credit facility, liquidity is adequate to navigate the cycle while funding strategic initiatives like the Rodaros partnership.

Conclusion: A Cyclical Player with Structural Advantages

Titan International has transformed itself from a pure-play cyclical OEM supplier into an integrated aftermarket platform with demonstrable margin resilience. The 500+ basis point gross margin improvement since 2019, achieved while absorbing a major acquisition and navigating a two-year agricultural downturn, proves that cost discipline and product mix shifts have permanently enhanced earnings power. This is significant because when the cycle turns—and management's indicators suggest 2026 as the inflection point—each dollar of incremental revenue will generate more profit than in prior upturns.

The "One Titan" strategy, built on the Carlstar acquisition and extended through the Rodaros partnership and Goodyear brand expansion, creates a moat that specialized competitors cannot easily replicate. Integrated wheel-tire assemblies, a growing aftermarket presence, and localized manufacturing in key markets provide both pricing power and supply chain resilience. These advantages become particularly valuable in an environment of trade policy uncertainty and supply chain disruption.

The investment thesis hinges on two variables: cyclical timing and execution of the integrated platform strategy. If agricultural and construction markets recover as management anticipates, TWI's enhanced margin structure should drive significant operating leverage. If integration efforts falter or the downturn extends, the company's conservative balance sheet and 45% aftermarket revenue base provide downside protection. For investors willing to ride the off-highway equipment cycle, Titan offers a rare combination of cyclical optionality and structural improvement at a valuation that doesn't require heroic assumptions.