Here's Why You Should Hold Terex (TEX) in Your Portfolio Now
Terex Corporation TEX has been gaining from strong demand and improved volumes, which is evident from the year-over-year growth in earnings over the past 11 quarters. TEX’s pricing actions and efforts to cut down costs have helped to offset the impact of supply-chain challenges and higher costs plaguing the industry at large.
Let’s delve deeper and analyze the factors that make this Zacks Rank #3 (Hold) company worth holding on to at present.
Solid Q3 Results: Terex reported third-quarter 2023 adjusted earnings per share of $1.75, which marks a year-over-year improvement of 45.8%. The bottom line beat the Zacks Consensus Estimate of earnings of $1.67 per share. Revenues in the reported quarter increased 15.1% year over year to $1,290 million, surpassing the consensus estimate of $1,250 million. The upside was driven by healthy demand across multiple businesses and improved price realization that helped offset higher costs.
Positive Earnings Surprise History: TEX has surpassed the Zacks Consensus Estimate in all the trailing four quarters. The company has an average trailing four-quarter positive earnings surprise of 30.3%.
Optimistic Growth Projections: The consensus estimate for the company’s 2023 earnings has moved 2% upward over the past 90 days and is pegged at $7.09 per share. It suggests growth of 64% from the year-ago reported figure. The consensus mark for 2024 earnings has gone up 1% over the past 90 days to $7.26 per share, which suggests a year-over-year improvement of 2.3%.
Upbeat FY23 Outlook: Backed by a strong performance in the third quarter, Terex raised its 2023 outlook. It expects earnings per share to be around $7.05, up from the previously stated earnings of $7.00 per share. Compared with the adjusted earnings per share of $4.32 reported in 2022, the projected figure highlights solid growth of 63%. Terex expects sales to be $5.15 billion. The company had earlier projected sales to be $5.1 billion.
Price Performance: Terex's shares have gained 17% in a year compared with the industry’s 10.8% growth.
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Solid Backlog Levels to Support Revenues: The company has been delivering year-over-year growth in earnings over the past 11 quarters, driven by robust bookings and revenue growth, and margin expansion in both business segments.
TEX’s backlog was $3.3 billion at the end of third-quarter 2023. It remains significantly above historical levels and is the second highest in recent history. Robust backlog and strong end-market demand are expected to support its top-line performance in the forthcoming quarters. Increased spending from the Infrastructure Bill is expected to be a major catalyst for Terex.
Strategic Initiatives Continue to Bear Fruit: The company continues to progress well on its “Execute, Innovate, Grow” strategy. In sync with this, it has been investing in innovative products, digital innovation, the expansion of manufacturing facilities and acquisitions. This will drive its performance in the forthcoming quarters.
TEX’s efforts to overcome supply disruptions and increase production will also boost results in the upcoming quarters. Price hikes and cost reductions will help offset inflationary pressures and aid earnings.
Solid Balance Sheet: As of Sep 30, 2023, the company had $846 million of total available liquidity and net leverage of 0.5X. It expects to generate a free cash flow of $375 million in 2023 compared with cashflow of $152 million in 2022.
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are Crane Company CR, Applied Industrial Technologies AIT and A. O. Smith Corporation AOS.
CR currently sports a Zacks Rank #1 (Strong Buy), and AIT and AOS each carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Crane Company’s 2023 earnings per share is pegged at $4.18. The consensus estimate for 2023 earnings has remained unchanged in the past 60 days. The company has a trailing four-quarter average earnings surprise of 29.8%. Shares of CR have rallied 35% in a year.
Applied Industrial has an average trailing four-quarter earnings surprise of 15%. The Zacks Consensus Estimate for AIT’s 2023 earnings is pegged at $9.43 per share, which indicates year-over-year growth of 7.8%. Earnings estimates have moved up 4% in the past 60 days. The company’s shares have rallied 29% in a year.
The Zacks Consensus Estimate for A. O. Smith’s 2023 earnings is pegged at $3.77 per share. The consensus estimate for 2023 earnings has moved 5% north in the past 60 days and suggests year-over-year growth of 20.1%. The company has a trailing four-quarter average earnings surprise of 14%. AOS shares have risen 33% in a year.
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Terex Corporation (TEX) : Free Stock Analysis Report
A. O. Smith Corporation (AOS) : Free Stock Analysis Report
Applied Industrial Technologies, Inc. (AIT) : Free Stock Analysis Report
Crane Company (CR) : Free Stock Analysis Report
