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Terex Plunges 36% in a Year: What's Pulling the Stock Down?

Zacks Equity Research

Shares of Terex Corporation TEX has plunged 36.2% over the past year compared with the industry’s fall of 15.9%. This depreciation has resulted from the multiple headwinds plaguing the company, of late.

The company has a market cap of roughly $1.74 billion. Average volume of shares traded in the past three months was around 1,223.7k.



Factors Weighing on the Stock

Terex’s share price has dropped 24.9% since it reported the second-quarter 2019 results. The company reported adjusted earnings per share of $1.21, missing the Zacks Consensus Estimate of $1.34 by a margin of 10%. The bottom-line figure too declined 8%, year on year.

Further, Terex trimmed its guidance for the current year, due to reduced outlook for the Aerial Work Platforms (AWP) segment, adverse foreign currency-exchange impact, product mix, lackluster sales growth and softer production volume. Terex now projects 2019 earnings per share at $3.40-$3.80 on net sales of approximately $4.6 billion. The company had earlier expected earnings per share in the upper half of its guided range of $3.60 to $4.20, and net sales of around $4.7 billion.

The company’s margin is also plagued with pricing and steel-cost headwinds. Inability of the company to pass on the increase by implementing price hikes might not always be feasible, given the competitive environment. This is likely to dent the company’s margins in the forthcoming periods.

Will the Stock Rebound?

Despite the near-term headwinds, Terex’s AWP segment will eventually gain from strategic source and savings, upbeat global markets, operational execution and innovation. Macroeconomic fundamentals and customers’ feedback hint at a multi-year growth period for this segment.

With favorable markets and a healthy backlog, its Material Processing (MP) segment is well poised for growth this year. Furthermore, rising global demand for crushing and screening equipment, solid global market for material handlers and continued progress in the Pick and carry business bodes well. The segment’s operating margin is projected at 14-14.5% for 2019, up from the 13-13.5% guided earlier. Sales are estimated to be up 4-7% on a comparative basis.

Terex’s Execute to Win strategy is focused on boosting the company’s capabilities by investing in people, processes and tools in three priority areas, and incorporating commercial excellence, lifecycle solutions and strategic sourcing. The company is well poised to benefit from the continued implementation of Execute to Win initiatives in 2019.

Moreover, Terex continues to execute its disciplined capital-allocation strategy. Last July, it announced the completion of the February 2018 authorization and its board of directors authorized repurchase of up to an additional $300 million of Terex’s outstanding shares. Additionally, management has approved the 10% hike of its quarterly dividend to 11 cents in 2019.

Terex Corporation Price and Consensus

Terex Corporation Price and Consensus

Terex Corporation price-consensus-chart | Terex Corporation Quote

Zacks Rank and Stocks to Consider

Terex currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the Industrial Products sector are Unifirst Corporation UNF, Albany International Corporation AIN and Cintas Corporation CTAS. While Unifirst flaunts a Zacks Rank #1 (Strong Buy), Albany International and Cintas carry a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Unifirst has a projected earnings growth rate of 15.17% for the current year. The stock has gained 8.5% in a year’s time.

Albany International has an estimated earnings growth rate of 32.3% for 2019. The company’s shares have been up 8.3% in the past year.

Cintas has an expected earnings growth rate of 11.15% for the ongoing year. The stock has appreciated 25.6% over the past year.

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