Yahoo Finance Terex (TEX) Stock Rallies 38% in a Year: More Room to Run?
Terex Corporation TEX has rallied approximately 38% in a year, faring way better than the industry’s 0.2% decline. Meanwhile, the Industrial Products sector has gained 1.2% while the Zacks S&P 500 composite has gone up 4.1% in the same time frame.
Terex has delivered year-over-year improvement in its top and bottom lines in the last nine quarters. This performance is impressive considering the inflationary headwinds and supply-chain issues witnessed by the industry at large over the past year. Terex’s backlog has also shown year-over-year improvement over the past nine quarters and reached a solid $4.1 billion at the end of first-quarter 2023. TEX has also outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering an average earnings surprise of 27.1%.
TEX has a market capitalization of $3.46 billion. The average volume of shares traded in the last three months was 1 million.
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The consensus estimate for 2023 and 2024 have both moved north by 4% and 3%, respectively, in the past 30 days. This reflects analysts’ optimism.
TEX currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Upbeat Outlook
Terex expects earnings per share between $5.60 and $6.00 in 2023, which indicates 34% growth at the mid-point from the 2022 reported figure. The company expects sales between $4.8 billion and $5.0 billion, compared with $4.4 billion reported in 2022. The improvement will be driven by strong price execution and volume growth.
The operating margin is expected at 11.4-11.8%, suggesting a rise from the margin of 9.5% reported in 2022. Growth will be driven by strong demand and the company’s efforts to overcome supply disruptions will increase production. Price hikes and cost reductions will help offset inflationary pressures and aid earnings.
Segments Poised Well for Growth
Terex’s Aerial Work Platforms segment is witnessing continued strong global demand, driven by fleet replacement and growth. It will gain from its efforts to right-size its cost structure, focus on operational execution and strengthen its global footprint and innovative product offerings.
In the Material Processing segment, robust end-market demand will drive revenues. A solid product pipeline, expansion into newer geographies, the rollout of innovative products and continued strong execution are positives.
Terex’s backlog in both its segments has improved over the past few quarters, which bodes well for its top-line performance in the forthcoming quarters. Higher spending on infrastructure in the United States is expected to be a major catalyst for TEX, going forward.
Continued Progress on Strategy Execution
Terex has made significant progress in its “Execute, Innovate, Grow” strategy. Per the “Execute” factor, TEX continues with the advancement made with its “Execute to Win” theme by intensifying process discipline and implementing several operational processes, among other initiatives. Working on this theme, TEX managed to lower its selling, general and administrative expenses to 10.6% of its sales in the first quarter of 2023 from 15.3% in 2020.
The “Innovate” factor emphasizes continuously developing its product offerings and applying technology. In sync with this objective, Terex introduced Utilities products for the electric grid and launched Genie products, including telehandlers and electric drive scissors. The company invested in digital with Customer Dealer Integration and telematics. Terex launched the first-of-its-kind all-electric utility truck. The “Grow” aspect focuses on increasing its inorganic investment and acquisitions, namely the Steelweld, ProAll and MARCO transactions.
Strong Balance Sheet to Aid Growth
At the end of Mar 31, 2023, TEX had $677 million of total available liquidity and net leverage of 1.0X. It expects to generate a free cash flow of $300-$350 million in 2023, whereas it reported a cash flow of $152 million in 2022. Its total debt-to-total capital ratio has gone down over the past few years and was at 0.38 as of Mar 31, 2023, lower than the industry’s figure of 0.67. The company’s times interest earned ratio was at 9.2.
Other Stocks to Consider
Some other top-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. (WOR), The Manitowoc Company, Inc. (MTW) and Pentair plc (PNR). WOR and MTW sport a Zacks Rank #1 at present, and PNR carries a Zacks Rank #2 (Buy).
Worthington Industries has an average trailing four-quarter earnings surprise of 27.5%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $4.93 per share. The consensus estimate for 2023 earnings has moved 17.7% north in the past 60 days. Its shares have gained 26.9% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share. The consensus estimate for 2023 earnings has moved 63.5% north in the past 60 days. MTW’s shares have gained 18.6% in the last year.
The consensus estimate for Pentair’s 2023 earnings per share is pegged at $3.66, up 3% in the past 60 days. It has a trailing four-quarter average earnings surprise of 7.2%. PNR has gained 14.9% in the last year.
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