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Terex (TEX) Up 31% So Far This Year: What's Driving the Rally?
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Terex Corporation’s (TEX - Free Report) shares have gained 31.1%, so far this year, outperforming the industry’s growth of 20.8%. Forecast-beating first-quarter 2021 results, improved demand, focus on cost-control actions, strategic growth initiatives and investment in innovative products have contributed to the company’s impressive price performance.
Let’s delve deeper and analyze the factors driving the stock.
Image Source: Zacks Investment Research
Earnings & Sales Beat Estimates in Q1: Given the increasing demand for Terex’s products, margin expansion across all segments and its cost-reduction efforts, the company reported better-than-expected results in first-quarter 2021. The company’s adjusted earnings of 56 cents per share beat the Zacks Consensus Estimate of 22 cents. This also marked a turnaround from the loss of 35 cents per share incurred in the prior-year quarter. Revenues of $864 million outpaced the consensus mark of $821 million.
The company has a trailing four-quarter average earnings surprise of 306.8%.
Driving Factors
Strategic Growth Initiatives a Boon
Terex made significant progress in its Focus, Simplify and Execute to Win strategy during the 2016-2019 period. 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, the company is now making progress 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” approach, the company continues the progress made with “Execute to Win” by expanding process discipline and implementing several new operational processes, among other initiatives. The “Innovate” factor emphasizes on continuously developing its product offerings and applying technology. The “Grow” aspect is committed to increasing inorganic investments and adding scope thorough acquisitions. This strategy will fuel growth in the years to come.
Segments Poised to Deliver Solid Results
Terex’s Aerial Work Platforms segment will gain from efforts to right-sizing its cost structure to align with customer demand, operational execution, strengthening global footprint and innovative new products over the long haul. The company anticipates segment sales in 2021 to be $2,125 million, up 19% from the $1,783 million seen in 2020, on improving end markets.
In the Material Processing segment, a robust product pipeline, expansion into newer geographies, delivering innovative products and continued strong execution position the segment well for growth. Given a healthy end-market demand, the segment is anticipated to report net sales of around $1,550 million, suggesting year-over-year growth of 23%. Additionally, the company is focused on maintaining a solid liquidity and cash position, positioning it well to navigate through the global health crisis. Terex continues to invest in innovative products and expansion of manufacturing facilities to fuel growth.
Upbeat View
Considering the improved market conditions and focus on operational execution, Terex now projects earnings per share for 2021 in the range of $2.35 and $2.55, higher than the previous guidance of $1.95 to $2.35. The guidance reflects a substantial improvement from the earnings of 13 cents reported in 2020. The company projects sales to be $3.7 billion in 2021, up from its previous estimate of $3.45 billion. The updated sales growth guidance indicates year-over-year growth of 20%.
Positive Earnings Estimates
The Zacks Consensus Estimate for the company’s current-year earnings is currently pegged at $2.49, suggesting a whopping 1,815.3% growth from the prior-year earnings of 13 cents per share.
Tennant has an anticipated earnings growth rate of 49.5% for 2021. The company’s shares have gained around 18%, year to date.
Encore Wire has an estimated earnings growth rate of 49.5% for the ongoing year. Year to date, the company’s shares have rallied nearly 36%.
Arconic has a projected earnings growth rate of 447% for the current year. The stock has appreciated around 21%, so far this year.
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Terex (TEX) Up 31% So Far This Year: What's Driving the Rally?
Terex Corporation’s (TEX - Free Report) shares have gained 31.1%, so far this year, outperforming the industry’s growth of 20.8%. Forecast-beating first-quarter 2021 results, improved demand, focus on cost-control actions, strategic growth initiatives and investment in innovative products have contributed to the company’s impressive price performance.
Let’s delve deeper and analyze the factors driving the stock.
Earnings & Sales Beat Estimates in Q1: Given the increasing demand for Terex’s products, margin expansion across all segments and its cost-reduction efforts, the company reported better-than-expected results in first-quarter 2021. The company’s adjusted earnings of 56 cents per share beat the Zacks Consensus Estimate of 22 cents. This also marked a turnaround from the loss of 35 cents per share incurred in the prior-year quarter. Revenues of $864 million outpaced the consensus mark of $821 million.
The company has a trailing four-quarter average earnings surprise of 306.8%.
Driving Factors
Strategic Growth Initiatives a Boon
Terex made significant progress in its Focus, Simplify and Execute to Win strategy during the 2016-2019 period. 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, the company is now making progress 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” approach, the company continues the progress made with “Execute to Win” by expanding process discipline and implementing several new operational processes, among other initiatives. The “Innovate” factor emphasizes on continuously developing its product offerings and applying technology. The “Grow” aspect is committed to increasing inorganic investments and adding scope thorough acquisitions. This strategy will fuel growth in the years to come.
Segments Poised to Deliver Solid Results
Terex’s Aerial Work Platforms segment will gain from efforts to right-sizing its cost structure to align with customer demand, operational execution, strengthening global footprint and innovative new products over the long haul. The company anticipates segment sales in 2021 to be $2,125 million, up 19% from the $1,783 million seen in 2020, on improving end markets.
In the Material Processing segment, a robust product pipeline, expansion into newer geographies, delivering innovative products and continued strong execution position the segment well for growth. Given a healthy end-market demand, the segment is anticipated to report net sales of around $1,550 million, suggesting year-over-year growth of 23%. Additionally, the company is focused on maintaining a solid liquidity and cash position, positioning it well to navigate through the global health crisis. Terex continues to invest in innovative products and expansion of manufacturing facilities to fuel growth.
Upbeat View
Considering the improved market conditions and focus on operational execution, Terex now projects earnings per share for 2021 in the range of $2.35 and $2.55, higher than the previous guidance of $1.95 to $2.35. The guidance reflects a substantial improvement from the earnings of 13 cents reported in 2020. The company projects sales to be $3.7 billion in 2021, up from its previous estimate of $3.45 billion. The updated sales growth guidance indicates year-over-year growth of 20%.
Positive Earnings Estimates
The Zacks Consensus Estimate for the company’s current-year earnings is currently pegged at $2.49, suggesting a whopping 1,815.3% growth from the prior-year earnings of 13 cents per share.
Zacks Rank & Stocks to Consider
Terex currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the industrial products sector are Tennant Company (TNC - Free Report) , Encore Wire Corp. (WIRE - Free Report) and Arconic Corp. . All of these stocks sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Tennant has an anticipated earnings growth rate of 49.5% for 2021. The company’s shares have gained around 18%, year to date.
Encore Wire has an estimated earnings growth rate of 49.5% for the ongoing year. Year to date, the company’s shares have rallied nearly 36%.
Arconic has a projected earnings growth rate of 447% for the current year. The stock has appreciated around 21%, so far this year.
Time to Invest in Legal Marijuana
If you’re looking for big gains, there couldn’t be a better time to get in on a young industry primed to skyrocket from $17.7 billion back in 2019 to an expected $73.6 billion by 2027.
After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%
You’re invited to check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.
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