■ Thoughts Post Call: TEX ripped ~4.5% on an in line quarter and guidance bump on tax following concerns of a miss related to Cranes. In addition to continued strength in AWPs, MHPS looks to have turned the corner as the port business is recovering coupled with restructuring help. Assuming this quarter becomes a trend, confidence for EPS growth in 2014 improves and TEX's 2015 targets look achievable. Additionally, despite a weaker Cranes quarter, TEX was fairly positive on order activity in October, which bodes well for growth in Q4 and into 1H'14. MP remains steady and Construction continues to disappoint. Overall, TEX continues to pull on numerous different levers to achieve earnings growth and reach its targets in a challenging macro environment. We remain encouraged with the growth prospects and improving execution and raise our FY'13-15 EPS to $2.15, $3.20 and $4.60. We increase our PT to $45 which uses a blended approach btw forward P/E and SOTP. TEX remains our top SMID Cap pick within Machinery.
■ Raising 2013 EPS Higher On Tax; Core Biz Trends Largely Unchanged: For 2013, TEX tweaked its EPS guidance higher to $2.05-$2.25 on lower 2013 tax (33%). However, EPS expectations for the underlying business are unchanged. Revs are adjusted downward $200M on each end to $7.3-$7.5B. In summary, AWP is expected to remain fairly strong, and MHPS looks to have turned the corner. Cranes had a soft third quarter but order activity in October bodes well for Q4 and into 1H'14. Construction remains challenged and MP revenues are likely down modestly, but profits can hold strong. For Q4, sales are forecast up y/y and FCF is still expected north of $400M+.