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Terex (TEX) Bets on Strong Demand Levels Amid High Costs
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Terex Corporation (TEX - Free Report) is well-poised for growth on the back of robust customer demand. Its backlog has been on an uptrend over the past six quarters and stands at a record $3.5 billion. Pricing and focusing on cost-control actions will help negate the impact of the ongoing supply chain, labor, logistics challenges and high costs. Strategic growth initiatives, investment in innovative products and digital innovation will drive growth for the company.
Solid Demand to Drive 2022 Results
Terex has been delivering year-over-year growth in earnings over the past five quarters, supported by robust bookings and revenue growth and margin expansion in both of the business segments. Its backlog has been improving over the past six quarters and hit a record $3.5 billion at the end of the first quarter of 2022. Robust backlog and strong demand are expected to favor its top-line performance.
The company expects sales between $4.1 billion and $4.3 billion in 2022. The mid-point of the range suggests growth of 8% from 2021. The earnings per share guidance is anticipated in the range of $3.55 to $4.05, indicating growth of 24% at the mid-point. Growth will be driven by strong demand and its efforts to overcome supply disruptions and increase production. Price hikes and cost reductions will help offset inflationary pressures and aid earnings.
Terex’s Aerial Work Platforms segment is poised to gain from the company’s efforts to right-size its cost structure in line with customer demand, operational execution, strengthening global footprint and innovative new products over the long haul. The segment is witnessing sustained solid global demand driven by fleet replacement and growth. Terex expects the AWP segment’s net sales in 2022 to be $2,300-$2,400 million. The mid-point of the range indicates year-over-year growth of 8%. Operating margin is expected to be 7.8-8.5% compared with 7.0% in 2021.
In the Material Processing segment, robust end-market demand across minerals processing, material handling and lifting, environmental, and concrete will drive revenues. A solid product pipeline, expansion into newer geographies, delivering innovative products and continued strong execution position the segment well for growth. The segment is anticipated to report net sales between $1,800 million and $1,900 million in 2022, indicating year-over-year growth of 9% at the mid-point. The segment’s operating margin is projected at 14-14.5% compared with 14.2% in 2021.
Strategic Initiatives in Place
The company has made significant progress in its “Execute, Innovate, Grow” strategy. Per the “Execute” theme, the company advances the progress made with its “Execute to Win” by intensifying process discipline and implementing several new operational processes, among other initiatives. Terex has managed to drive its SG&A expense down to 11% of sales.
The “Innovate” factor emphasizes continuously developing its product offerings and applying technology. The company has invested in connected assets and digital capabilities to better serve customers. The “Grow” aspect focuses on increasing inorganic investment and adding scope through acquisitions. This strategy will fuel the company’s growth in the years to come. Terex continues to invest in the expansion of manufacturing facilities to ensure future growth.
Additionally, the company is focused on maintaining a solid liquidity and cash position. Its total debt-to-total capital ratio has gone down over the past few years and was at 0.40 as of Mar 31, 2022. The company’s times interest earned ratio was at 7.
Price Performance
The stock has fallen 34.4% in a year, compared with the industry’s decline of 10.8%.
Graphic Packaging has an estimated earnings growth rate of 86.8% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 7.6%.
Graphic Packaging pulled off a trailing four-quarter earnings surprise of 7.2%, on average. The company’s shares have appreciated 15% in a year.
Myers Industries has an expected earnings growth rate of 67% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 27% in the past 60 days.
MYE has a trailing four-quarter earnings surprise of 20.1%, on average. Myers Industries’ shares have gained 10% over the past year.
Packaging Corporation has an expected earnings growth rate of 16.2% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 4.2% in the past 60 days.
PKG has a trailing four-quarter earnings surprise of 19.6%, on average. Packaging Corporation’s shares have gained 1% in a year.
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Terex (TEX) Bets on Strong Demand Levels Amid High Costs
Terex Corporation (TEX - Free Report) is well-poised for growth on the back of robust customer demand. Its backlog has been on an uptrend over the past six quarters and stands at a record $3.5 billion. Pricing and focusing on cost-control actions will help negate the impact of the ongoing supply chain, labor, logistics challenges and high costs. Strategic growth initiatives, investment in innovative products and digital innovation will drive growth for the company.
Solid Demand to Drive 2022 Results
Terex has been delivering year-over-year growth in earnings over the past five quarters, supported by robust bookings and revenue growth and margin expansion in both of the business segments. Its backlog has been improving over the past six quarters and hit a record $3.5 billion at the end of the first quarter of 2022. Robust backlog and strong demand are expected to favor its top-line performance.
The company expects sales between $4.1 billion and $4.3 billion in 2022. The mid-point of the range suggests growth of 8% from 2021. The earnings per share guidance is anticipated in the range of $3.55 to $4.05, indicating growth of 24% at the mid-point. Growth will be driven by strong demand and its efforts to overcome supply disruptions and increase production. Price hikes and cost reductions will help offset inflationary pressures and aid earnings.
Terex’s Aerial Work Platforms segment is poised to gain from the company’s efforts to right-size its cost structure in line with customer demand, operational execution, strengthening global footprint and innovative new products over the long haul. The segment is witnessing sustained solid global demand driven by fleet replacement and growth. Terex expects the AWP segment’s net sales in 2022 to be $2,300-$2,400 million. The mid-point of the range indicates year-over-year growth of 8%. Operating margin is expected to be 7.8-8.5% compared with 7.0% in 2021.
In the Material Processing segment, robust end-market demand across minerals processing, material handling and lifting, environmental, and concrete will drive revenues. A solid product pipeline, expansion into newer geographies, delivering innovative products and continued strong execution position the segment well for growth. The segment is anticipated to report net sales between $1,800 million and $1,900 million in 2022, indicating year-over-year growth of 9% at the mid-point. The segment’s operating margin is projected at 14-14.5% compared with 14.2% in 2021.
Strategic Initiatives in Place
The company has made significant progress in its “Execute, Innovate, Grow” strategy. Per the “Execute” theme, the company advances the progress made with its “Execute to Win” by intensifying process discipline and implementing several new operational processes, among other initiatives. Terex has managed to drive its SG&A expense down to 11% of sales.
The “Innovate” factor emphasizes continuously developing its product offerings and applying technology. The company has invested in connected assets and digital capabilities to better serve customers. The “Grow” aspect focuses on increasing inorganic investment and adding scope through acquisitions. This strategy will fuel the company’s growth in the years to come. Terex continues to invest in the expansion of manufacturing facilities to ensure future growth.
Additionally, the company is focused on maintaining a solid liquidity and cash position. Its total debt-to-total capital ratio has gone down over the past few years and was at 0.40 as of Mar 31, 2022. The company’s times interest earned ratio was at 7.
Price Performance
The stock has fallen 34.4% in a year, compared with the industry’s decline of 10.8%.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Terex currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are Graphic Packaging Holding Company (GPK - Free Report) , Myers Industries (MYE - Free Report) and Packaging Corporation (PKG - Free Report) . All of these stocks carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Graphic Packaging has an estimated earnings growth rate of 86.8% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 7.6%.
Graphic Packaging pulled off a trailing four-quarter earnings surprise of 7.2%, on average. The company’s shares have appreciated 15% in a year.
Myers Industries has an expected earnings growth rate of 67% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 27% in the past 60 days.
MYE has a trailing four-quarter earnings surprise of 20.1%, on average. Myers Industries’ shares have gained 10% over the past year.
Packaging Corporation has an expected earnings growth rate of 16.2% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 4.2% in the past 60 days.
PKG has a trailing four-quarter earnings surprise of 19.6%, on average. Packaging Corporation’s shares have gained 1% in a year.