On a scale of 1 to 10, I rate them a 3. The good news is they beat the consensus estimate for revenue by 11%. The revenues were down slightly from Q4, however, so one has to wonder if their market is growing again or did revenue bubble form by their dealers building inventory levels back up. The really bad news is their operating profit is going the wrong way. Op loss of $9B is the worst since Q2 2010. Excluding one time unusual items, they missed the consensus pps by $.07/shr at -$.17/shr. Their already blaming material prices - which are going to get worse. The backlog increased, which is good, but that is offset by the remark that price increases won't be effective unto late in the 2nd qtr - which I translate to the current rate of operating loss will continue for at least six weeks. Stock was up in the aftermarket, but I don't think investors had time to analyze the actual pps. TEX reaffirmed their long term revenue goal of $8B and 12% operating margin - but they didn't give a timeline. Let's assume they hit $0.65/shr this year and double earnings in 2012, valuation should be about $26/shr.
A couple of years ago, TEX was going to earn something like $10/share and $15 billion in revenues.
What ever happened with those expectations?
This company can only grow via acquisitions.
I'll buy back when the stock goes to $22
Adjusting for these items, income from continuing operations would have been approximately $11 million, or $0.10 per share.
10 cents is still a miss relative to consensus of 18 cents.
What the hell happened to margins? Higher revenue but lower EPS?
They earned $11M and they want to buy a company for $1.4B???
Don't disagree about operating profit. That was the main concern I posted after Q1 results. They underestimated the time and effort required to flip a supply base back on when the market goes from famine to feast quickly. Backorders stack up suddenly, and you go from excess capacity to expediting / air freighting parts. (Not to say I believe this market is firing on all cylinders yet).
I do think Demag will work well with Terex in the long run. Demag's results were far more stable through the trough. It's hard to generate organic growth in an industry where you are #6 or #7 in an industry -- you spend all your time trying to wrestle business away from the lead dogs. Now, hopefully, Terex can focus on ports and cranes, employ synergies between the two companies, and spend their energies innovating and expanding the market itself. Lead dogs get a better view of where the industry and markets are headed. It wouldn't hurt them to think about sheddng a couple more product lines. Scrapers? Maybe, graders? Continue to narrow their focus to core competencies -- industries where they can lead.
TEX had to reinvest the Bucyrus proceeds, and I think ultimately this will be a good move. TEX investors weren't going to stick around while Terex pulls a dividend off of Bucyrus/Cat stock. They could just buy CAT.
Since my analysis of Q1 results missed the mark by so much ; ) perhaps somebody else would like to take a stab at Q2? Stonefoxcapital? Pavitab?
BTW, I like the Demag deal. It's just going to take a little time to see ROI. TEX has chosen to grow in a market where they can lead. They sold their way out of the mining industry and the global competition in the earthmoving industry is too much for them. They can be a leader in ports and cranes well into the future.
I don't believe I made a prediction on what today's stock price would be. I'm not surprised if the 23 year old analysts like today's spin. I've been following this industry for over twenty years, and my analysis was on TEX's likelihood of meeting expectations over the next two years. I'm an investor -- not a trader. Here's one for you, check out this link: http://www.sanyamerica.com/ Major Chinese player Sany has come to America. Cheap construction equipment and cranes. Whose market share do you think they're going to take? Caterpillar? Volvo? Guess again. LOL
I hope your a trader and not an investor. I also hope the Feds tax the heck out of short gains to fix the chaos caused in the market by shorts and day traders.
It simply comes down to one's macro picture, and the company's ability to execute within that.
If you think the $8B at 12% is doable, that's the $6 EPS. If you don't, shouldn't own the stock.
Even if you grant them the $6, you have to figure when, what multiple, and what discount back from that.
If it takes three years, 2014, and only sells at 10X then, even a 20% discount rate makes the stock worth $34.75 today.
Pick your time frame, multiple and rate............ it's a wide variable.