Terex Upgraded to Outperform - Analyst Blog


On Jan 17, we upgraded our recommendation on Terex Corp. ( TEX ) from Neutral to Outperform as the estimates were positively revised following its strong third-quarter earnings results, initiation of quarterly dividend, announcement of a share buyback program and sale of its truck business.

Furthermore, expected benefits from replacement demand in the Aerial Work Platforms (AWP) segment, improvement in Port business and realization of restructuring benefits that will help results in the Materials Handling & Port Solutions (MHPS) segment, also garnered a more positive outlook.

Why Upgraded?

Terex reported third-quarter 2013 adjusted earnings of 77 cents per share, a 24% improvement year over year, mainly due to reduced interest expense and a lower effective tax rate. The results also surpassed the Zacks Consensus Estimate of 58 cents.

At quarter-end, backlog of orders to be filled during the next 12 months was around $1.8 billion, a 7% year-over-year rise driven by strong demand for AWP products, together with large port equipment orders for MHPS.

The outlook for Aerial Work Platform segment remains strong on the back of encouraging replacement demand and equipment rental. The Materials Handling & Port Solutions segment generated profit in the third quarter, reversing the losses posted in the last three quarters.

This was brought about by improved performances in the Port business as well as the parts and service section. Segment results are expected to improve, driven by improved performance and large deliveries (particularly Rotterdam) at the Port business and realization of restructuring benefits.

Terex has decided to sell its truck business in an effort to transform itself into a lifting and material handling solutions company. This divestiture will enable it to focus on cranes, aerial lifts and telehandlers and is in line with the company's focus on streamlining its construction business by selling certain underperforming product lines during the year. The company is on track with internal cost reduction initiatives in the Material Handling & Port Solutions and Crane businesses and expects to realize benefits in 2014 and ahead.

Terex's board of directors has initiated a quarterly dividend of 5 cents per share with a dividend yield of 0.5%. The company also announced a share repurchase program to buyback up to $200 million through Dec 31, 2015. The share repurchase is expected to be accretive to earnings in 2014 and 2015.

Other Stocks to Consider

Terex currently holds a Zacks Rank #2 (Buy). Other players in the industry which look attractive at current levels include Kubota Corp. ( KUBTY ), Columbus McKinnon Corp. ( CMCO ) and Zebra Technologies Corp. ( ZBRA ). All of these companies hold a Zacks Rank #1 (Strong Buy).

COLUMBUS MCKINN (CMCO): Free Stock Analysis Report


TEREX CORP (TEX): Free Stock Analysis Report

ZEBRA TECH CL A (ZBRA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: AWP , CMCO , KUBTY , TEX , ZBRA

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