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Terex Corporation (TEX - Free Report) provided details of its transformation efforts to aid profitability and outlined multiple growth avenues in the forthcoming years at its Investor Day. Favorable megatrends, investments in new technology and innovative solutions, and focus on delivering operational excellence are expected to support growth. TEX affirmed its 2022 guidance and provided the same for 2027.
Transformation Efforts Bearing Fruit
Over the past few years, Terex has undergone a transformation journey that entailed divesting capital-intensive, low-margin businesses and instead focusing on areas with high growth potential. Also, by focusing on cost reduction and operating system enhancement, TEX has reduced SG&A as a percent of sales from 14% in 2015 to the current 10.4%. The company’s earnings per share have grown from $1.30 in 2015 to $3.07 in 2021. Its Return on Invested Capital (ROIC) is expected to more than triple from 6.6% in 2015 to 20% in 2022.
The company has been growing its Material Processing segment, which generated around 25% of the operating profit in 2015 and now accounts for 60%. It has also been growing its parts & services business, which is a predictable and profitable business.
“Execute, Innovate, Grow” Strategy: A Catalyst
Terex continues to progress well on its “Execute, Innovate, Grow” strategy. Per the “Execute” theme, the company continues the progress made with its “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 apply technology. The “Grow” aspect focuses on increasing inorganic investment and adding scope through acquisitions. To this end, it has completed five acquisitions since 2021.
2022 Guidance Affirmed
Terex retained its 2022 guidance during the third quarter conference call. It expects sales of $4.3 billion for 2022, suggesting a 10.5% rise from that reported in 2021. Earnings per share are expected between $4.00 and $4.20, which indicates 33.6% year-over-year growth at the mid-point. Strong demand, price hikes and cost reductions will help offset inflationary pressures and aid earnings.
Poised Well to Gain From Megatrends
Terex is a market leader in sizable and attractive markets and is well-positioned to benefit from megatrends that will boost the demand for its products and solutions. A strong balance sheet and cash flow support future growth and return of capital to shareholders. The expected spending of $1.2 trillion over the next decade as a result of the Infrastructure Bill is anticipated to be a major catalyst for TEX, going forward. The $369 billion allotted to reduce greenhouse gas emissions per the Inflation Reduction Act is likely to trigger $1.3 trillion in energy spending. This is also expected to support TEX’s growth.
Initiates 2027 Guidance
For 2027, TEX expects net sales of more than $6 billion, witnessing a CAGR of 7% over 2022. The operation margin is expected to be between 13% and 14%, showing a 350-450-basis-point improvement over 2022. Earnings per share are expected to be between $8.00 and $9.50.
Segments Poised for Growth
The Material Processing (MP) segment has been a consistent performer, generating 9% sales (CAGR) and 575 basis points of operating profit improvement since 2016. It is poised well to deliver growth, backed by a strong and diverse portfolio of market-leading products and brands, industry-leading dealer networks, and continued investment in new offerings and acquisitions.
In 2022, the MP segment is anticipated to report net sales of $1.9 billion, indicating year-over-year growth of 12%. The segment’s operating margin is projected at 15-15.3% compared with 14.2% reported in 2021.
For 2027, the segment’s sales are projected to reach $2.7 billion, witnessing a CAGR of 7.5% from 2022. The operating margin target for the year is 16-16.5%.
The Aerial Work Platforms (AWP) continues to boost its capabilities by entering markets and bringing products. The segment will gain on continued strong global demand, driven by fleet replacement. The Genie business has significantly reduced costs in recent years to increase profitability.
Terex expects the AWP segment’s net sales in 2022 to be $2.4 billion, projecting year-over-year growth of 10%. The operating margin is expected at 8% compared with 7.0% reported in 2021. In 2027, the segment’s sales are expected to be more than $3.3 billion. The operating margin for the AWP segment will be 13-14% in 2027.
Price Performance
Image Source: Zacks Investment Research
The stock has gained 32.2% in the past three months compared with the industry’s 31% growth.
Applied Industrial Technologies’ earnings surprise in the last four quarters was 24.7%, on average. In the past 60 days, its earnings estimates have increased 4.6% for 2022. For the ongoing year, the bottom line is estimated to be $7.52, suggesting growth of 14.3% from the previous year’s reported level. The AIT stock has appreciated 22% in the past three months.
Tenaris has an estimated year-over-year earnings growth rate of 131.5% for the current fiscal year. Earnings per share estimates are pegged at $4.33. Estimates have been revised 5.1% north in the past 60 days. TS has an average trailing four-quarter earnings surprise of 20.9%. Its shares have appreciated 22% over the past three months.
W.W. Grainger delivered a trailing four-quarter earnings surprise of 10.1%, on average. GWW’s current-year earnings are estimated to be $29.31 per share at present, suggesting estimated growth of 161.1% from the year-ago reported figure. Estimates moved up 4.4% in the last 60 days. GWW’s shares have risen 9% in the past three months.
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Terex (TEX) Outlines Long-Term Strategy, Unveils 2027 Targets
Terex Corporation (TEX - Free Report) provided details of its transformation efforts to aid profitability and outlined multiple growth avenues in the forthcoming years at its Investor Day. Favorable megatrends, investments in new technology and innovative solutions, and focus on delivering operational excellence are expected to support growth. TEX affirmed its 2022 guidance and provided the same for 2027.
Transformation Efforts Bearing Fruit
Over the past few years, Terex has undergone a transformation journey that entailed divesting capital-intensive, low-margin businesses and instead focusing on areas with high growth potential. Also, by focusing on cost reduction and operating system enhancement, TEX has reduced SG&A as a percent of sales from 14% in 2015 to the current 10.4%. The company’s earnings per share have grown from $1.30 in 2015 to $3.07 in 2021. Its Return on Invested Capital (ROIC) is expected to more than triple from 6.6% in 2015 to 20% in 2022.
The company has been growing its Material Processing segment, which generated around 25% of the operating profit in 2015 and now accounts for 60%. It has also been growing its parts & services business, which is a predictable and profitable business.
“Execute, Innovate, Grow” Strategy: A Catalyst
Terex continues to progress well on its “Execute, Innovate, Grow” strategy. Per the “Execute” theme, the company continues the progress made with its “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 apply technology. The “Grow” aspect focuses on increasing inorganic investment and adding scope through acquisitions. To this end, it has completed five acquisitions since 2021.
2022 Guidance Affirmed
Terex retained its 2022 guidance during the third quarter conference call. It expects sales of $4.3 billion for 2022, suggesting a 10.5% rise from that reported in 2021. Earnings per share are expected between $4.00 and $4.20, which indicates 33.6% year-over-year growth at the mid-point. Strong demand, price hikes and cost reductions will help offset inflationary pressures and aid earnings.
Poised Well to Gain From Megatrends
Terex is a market leader in sizable and attractive markets and is well-positioned to benefit from megatrends that will boost the demand for its products and solutions. A strong balance sheet and cash flow support future growth and return of capital to shareholders. The expected spending of $1.2 trillion over the next decade as a result of the Infrastructure Bill is anticipated to be a major catalyst for TEX, going forward. The $369 billion allotted to reduce greenhouse gas emissions per the Inflation Reduction Act is likely to trigger $1.3 trillion in energy spending. This is also expected to support TEX’s growth.
Initiates 2027 Guidance
For 2027, TEX expects net sales of more than $6 billion, witnessing a CAGR of 7% over 2022. The operation margin is expected to be between 13% and 14%, showing a 350-450-basis-point improvement over 2022. Earnings per share are expected to be between $8.00 and $9.50.
Segments Poised for Growth
The Material Processing (MP) segment has been a consistent performer, generating 9% sales (CAGR) and 575 basis points of operating profit improvement since 2016. It is poised well to deliver growth, backed by a strong and diverse portfolio of market-leading products and brands, industry-leading dealer networks, and continued investment in new offerings and acquisitions.
In 2022, the MP segment is anticipated to report net sales of $1.9 billion, indicating year-over-year growth of 12%. The segment’s operating margin is projected at 15-15.3% compared with 14.2% reported in 2021.
For 2027, the segment’s sales are projected to reach $2.7 billion, witnessing a CAGR of 7.5% from 2022. The operating margin target for the year is 16-16.5%.
The Aerial Work Platforms (AWP) continues to boost its capabilities by entering markets and bringing products. The segment will gain on continued strong global demand, driven by fleet replacement. The Genie business has significantly reduced costs in recent years to increase profitability.
Terex expects the AWP segment’s net sales in 2022 to be $2.4 billion, projecting year-over-year growth of 10%. The operating margin is expected at 8% compared with 7.0% reported in 2021. In 2027, the segment’s sales are expected to be more than $3.3 billion. The operating margin for the AWP segment will be 13-14% in 2027.
Price Performance
Image Source: Zacks Investment Research
The stock has gained 32.2% in the past three months compared with the industry’s 31% growth.
Zacks Rank & Stocks to Consider
TEX currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are Applied Industrial Technologies (AIT - Free Report) , Tenaris (TS - Free Report) and W.W. Grainger (GWW - Free Report) . AIT sports a Zacks Rank #1 (Strong Buy), while TS and GWW has Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Industrial Technologies’ earnings surprise in the last four quarters was 24.7%, on average. In the past 60 days, its earnings estimates have increased 4.6% for 2022. For the ongoing year, the bottom line is estimated to be $7.52, suggesting growth of 14.3% from the previous year’s reported level. The AIT stock has appreciated 22% in the past three months.
Tenaris has an estimated year-over-year earnings growth rate of 131.5% for the current fiscal year. Earnings per share estimates are pegged at $4.33. Estimates have been revised 5.1% north in the past 60 days. TS has an average trailing four-quarter earnings surprise of 20.9%. Its shares have appreciated 22% over the past three months.
W.W. Grainger delivered a trailing four-quarter earnings surprise of 10.1%, on average. GWW’s current-year earnings are estimated to be $29.31 per share at present, suggesting estimated growth of 161.1% from the year-ago reported figure. Estimates moved up 4.4% in the last 60 days. GWW’s shares have risen 9% in the past three months.