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Terex (TEX) Up 48% in 3 Months: What's Driving the Rally?

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Terex Corporation (TEX - Free Report) is well poised to gain from the strategic growth initiatives in its segments, investments in innovative products as well as focus on cost-reduction actions. The company’s shares have appreciated 48.2% over the past three months, outperforming the industry’s rally of 20.6%. Notably, the S&P 500 has gained 12.6% during the same time frame.



The company reported adjusted earnings per share of 31 cents for the September-end quarter, surpassing the Zacks Consensus Estimate of 4 cents. Revenues of $766 million also beat the consensus mark of $757 million.

Terex recorded an earnings growth rate of 8.7% over the last five years, outperforming the industry’s growth of 4.3%. The company has a market cap of $2.4 billion.

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

Driving Factors

Terex has made considerable progress in its Focus, Simplify and Execute to Win strategy. Having fulfilled the Focus and Simplify elements of this strategy, the company is now making progress toward the process-improvement objectives associated with Execute to Win.

In sync with the Focus element that calls for increased investments in high-performing businesses, Terex completed the divesture of the Demag Mobile Cranes business and certain U.S. Crane product lines. The company’s business portfolio now comprises businesses with the ability to earn more than their cost of capital through business cycles consistently. Also, over the past few years, Terex has transformed into a structurally simpler company committed to becoming more process-driven in order to achieve operational excellence.

Under its Execute to Win strategy, the company is focused on enhancing its capabilities by investing in people, processes and tools in three priority areas — Commercial Excellence, Lifecycle Solutions and Strategic Sourcing. Terex is now committed to its next phase of “Execute, Innovate, Grow.” It will focus on boosting cash flow and profitability, and continue to innovate products and technology.

Terex’s Aerial Work Platforms (AWP) segment will gain from strategic source and savings, right-sizing the cost structure, operational execution and strengthening the company’s global footprint over the long haul. The utilities business will benefit from the new manufacturing facility being built in Watertown, SD, that will increase its capacity and significantly boost productivity. In the Materials Processing (MP) segment, a solid product pipeline, expansion into newer geographies and manufacturing of innovative products position the segment well for growth.

Terex is focused on maintaining a robust liquidity and cash position, placing it well to navigate through the current unprecedented situation. The company has implemented several cost-reduction actions to preserve cash, which is likely to deliver solid free cash flow in the ongoing quarter. Moreover, Terex has reduced its capital expenditure for this year, while continuing to fund growth capital projects. The company continues to invest in innovative products and the expansion of manufacturing facilities to ensure growth in the upcoming period.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the Industrial Products sector include AGCO Corporation (AGCO - Free Report) , Crown Holdings, Inc. (CCK - Free Report) and Ball Corporation . While AGCO flaunts a Zacks Rank #1 (Strong Buy), Crown Holdings and Ball Corp carry a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO has a long-term earnings growth rate of 13.2%. The stock has appreciated 42% in three months’ time.

Crown Holdings has a long-term earnings growth rate of 5%. Shares of the company have gained 24.8% in the past three months.

Ball Corp has a long-term earnings growth rate of 5%. Over the past three months, the company’s shares have rallied 12.1%.

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