What Does Terex (TEX) Guidance Cut Mean for Your Portfolio? - Analyst Blog

Shares of Terex Corp. ( TEX ) slumped 6% on Sep 15 as the crane and construction equipment maker lowered its 2014 guidance citing weak crane demand. The company hit a 52-week low of $32.00 during trading on the same day.

Terex outlined its 2014 earnings expectation between $2.35 and $2.50, down from the previous range of $2.50 and $2.80. This reflects annual growth of 5% to 12% from $2.23 in the prior year. For the third quarter, the results of which are expected to be announced on Oct 22, 2013, the company provided an earnings per share guidance of 55 cents to 65 cents, compared with the year-ago quarter figure of 77 cents. This reflects a decline in the range of 16% to 29%.

The company stated that despite a positive trend in book-to-bill ratios in the first half of 2014, order rates for the Cranes segment have gone down drastically in July and August. Moreover, Cranes customers, in developing markets, are struggling to secure financing for orders scheduled for delivery in the back half of 2014.

The company pointed out that the weakness in the Cranes markets are now even more pronounced than what was predicted in February. The company is concerned that the positive trends witnessed in its other segments will be more than offset by the weakness in Cranes end markets. Terex's free cash flow guidance however remains intact in the range of $200 million to $250 million in 2014.

Net sales for the Cranes segment for the first half of fiscal 2104 declined 9.6% to $897 million from the comparable prior-year period. The segment contributed to 24% of Terex's sales in the first half. Terex experienced declines in demand for mobile cranes in North America and Latin America, and pick and carry cranes in Australia. In addition, sales were weaker in the Middle East and Southeast Asia. This was however partially offset by improving sales for large crawler cranes and tower cranes, as well as an improving demand environment in Europe.

The outlook for Terex's Aerial Work Platform (AWP) segment remains strong for the rest of the year, supported by an ongoing recovery in the North American construction market. Terex will realize benefits in 2014 from its substantive actions undertaken to adjust the cost structure of the Materials Handling & Port Solutions as well as Cranes and Construction segments. While weaker end market, a lower anticipated share count and continued market uncertainty remain as headwinds.

Westport, CT-based Terex is a global equipment manufacturer, catering to the construction, infrastructure and surface mining industries. The company's manufacturing facilities are located in the U.S., Canada, Europe, Australia, Asia and South America. It also offers a complete line of financial products and services to assist in the acquisition of equipment through Terex Financial Services.

Terex currently holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include IDEX Corporation ( IEX ), AO Smith Corp. ( AOS ) and ACCO Brands Corporation ( ACCO ). All of these stocks carry a Zacks Rank #2 (Buy).

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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 Nasdaq, Inc.

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

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