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Terex (TEX) Up 32% in 3 Months: What's Driving the Rally?

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Terex Corporation TEX is well poised to gain from the strategic growth initiatives, investment in innovative products, digital innovation and expansion of manufacturing facilities. The company’s shares have appreciated 32.4% over the past three months, outperforming the industry’s rally of 26.6%. Notably, the S&P 500 has gained 6.1% during the same time frame.

Let’s delve deeper and analyze the factors driving the stock.

Driving Factors

Terex has made significant progress in its Focus, Simplify and Execute to Win strategy during the 2016-2019 timeframe. In sync with the Focus element that calls for increased investments on high performing businesses, the company completed the sale of the Demag Mobile Cranes business and certain U.S. Crane product lines.

With the Focus and Simplify elements of this strategy being met, it is making advancing toward the process improvement objectives associated with Execute to Win. Terex is now committed to its next phase of “Execute, Innovate, Grow.” Per the “Execute” theme, the company continues the progress made with “Execute to Win” by intensifying process discipline and implementing several new operational processes, among other initiatives. The “Innovate” theme seeks to continuously develop its product offerings and applying technology. The “Grow” aspect focuses on increasing inorganic investment and adding scope thorough acquisitions. This strategy will fuel growth in the years to come.

Factoring in the anticipated benefits of cost actions and improving customer demand witnessed particularly in fourth-quarter 2020, the company projects 2021 sales at $3.45 billion. The figure indicates year-over-year growth of 12%. Earnings per share are estimated in the range of $1.95 to $2.35 for the ongoing year, which suggests a substantial improvement from earnings of 13 cents reported in 2020.

Moreover, Terex’s Aerial Work Platforms segment will gain from strategic source and savings, right-sizing cost structure to align with customer demand, operational execution, strengthening global footprint and innovative new products over the long haul. The utilities business will benefit from the new manufacturing facility being built in Watertown, SD, which will boost capacity and significantly improve productivity. In the Material Processing segment, robust product pipeline, expansion into newer geographies, delivering innovative products and consistent strong execution position the segment well for growth. In addition, the company is focused on maintaining a strong liquidity and cash position, positioning it well to navigate through the prevalent global health crisis.

Zacks Rank & Stocks to Consider

Terex currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector are Deere & Co. DE, AGCO Corporation AGCO and Avery Dennison Corporation AVY, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Deere has a projected earnings growth rate of 82.5% for fiscal 2021. Over the past year, the company’s shares have appreciated 133.2%.

AGCO has an estimated earnings growth rate of 29.9% for the ongoing year. The company’s shares have surged 134.1% in the past year.

Avery Dennison has an expected earnings growth rate of 11.8% for 2021. The stock has gained 79.2% in a year’s time.

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