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Reasons to Add Terex (TEX) Stock to Your Portfolio Now

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Terex Corporation’s (TEX - Free Report) strong fundamentals and solid financial position, with robust growth projections, make it a good investment choice. It is well-poised for growth on the back of robust customer demand and backlog levels in both its segments. Focus on cost-control actions, strategic growth initiatives, investment in innovative products and digital growth bodes well.

TEX currently has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, in combination with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.

Price Performance

The stock has gained 24.5% in the past year against the industry’s 2.1% decline.


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Image Source: Zacks Investment Research


Positive Earnings Surprise Trend

Terex has surpassed the Zacks Consensus Estimate in all the trailing four quarters, delivering an earnings surprise of 28.3%.

Upbeat Outlook

Terex expects earnings per share between $4.60 and $5.00 in 2023, which indicates 11% growth at the mid-point from that reported in 2022. The company expects sales between $4.6 billion and $4.8 billion. The mid-point of the range suggests growth of 6% from that reported in 2022. The improvement will be driven by strong price execution of around 10% and volume growth of approximately 7%. The operating margin is expected at 10-10.4%, higher than the margin of 9.5% reported in 2022. Growth will be driven by strong demand, and the company’s efforts to overcome supply disruptions and increase production. Price hikes and cost reductions will help offset inflationary pressures and aid earnings.

Northward Growth Projections

The Zacks Consensus Estimate for TEX’s 2023 earnings per share has moved up 3% to $4.89. The figure indicates a 30.6% improvement from the prior-year reported figure. The same for 2023 stands at $5.14, projecting a year-over-year improvement of 1.9%. The estimate has moved up 4% over the past 60 days.

TEX has an estimated long-term earnings growth rate of 18.8%.

Solid Momentum in Segments

Terex’s Aerial Work Platforms segment is witnessing continued solid global demand. It will gain from its efforts to right-size its cost structure, focus on operational execution, a strengthening global footprint and innovative product offerings. In the Material Processing segment, robust end-market demand will drive revenues. A solid product pipeline, expansion into newer geographies, the rollout of innovative products and continued strong execution are positives.

Terex’s backlog in both its segments improved over the last nine quarters due to solid demand. TEX ended 2022 with a solid total backlog of $4.1 billion, up 22% from last year’s levels. This bodes well for its top-line performance in the forthcoming quarters. Higher spending on infrastructure in the United States is expected to be a major catalyst for TEX, going forward.

Other Key Drivers

Terex made significant progress in its “Execute, Innovate, Grow” strategy. Per the “Execute” theme, TEX continues the advancement made with its “Execute to Win” theme by intensifying process discipline and implementing several new operational processes, among other initiatives. Working on this theme, TEX managed to lower its SG&A expenses to 10.2% of its sales in 2022 from 15.3% in 2020.

The “Innovate” factor emphasizes continuously developing its product offerings and applying technology. In sync with this objective, Terex recently launched the first-of-its-kind all-electric utility truck. The “Grow” aspect focuses on increasing its inorganic investment and acquisitions, namely the Steelweld and ProAll transactions.

At the end of 2022, the company had $727 million of total available liquidity, with no near-term maturities. It expects to generate a free cash flow of $225-$275 million in 2023, whereas it reported $152 million in 2022. Its total debt-to-total capital ratio has gone down over the past few years and was at 0.40 as of Dec 31, 2022, lower than the industry’s 0.70. The company’s times interest earned ratio was at 8.5. Terex used $160 million in capital expenditure and growth investments in 2022. Terex’s board of directors recently approved a 15% hike in dividends.

Other Stocks to Consider

Some other top-ranked stocks from the Industrial Products sector are OI Glass (OI - Free Report) , Alamo Group (ALG - Free Report) and Illinois Tool Works (ITW - Free Report) . OI and ALG sport a Zacks Rank of 1 at present, and ITW has a Zacks Rank of #2.

OI Glass has an average trailing four-quarter earnings surprise of 16.4%. The Zacks Consensus Estimate for OI’s 2023 earnings is pegged at $2.57 per share. This indicates an 11.7% increase from the prior-year reported figure. The consensus estimate for 2023 earnings has moved 16% north in the past 60 days. OI’s shares gained 60% in the last year.

Alamo has an average trailing four-quarter earnings surprise of 6%. The Zacks Consensus Estimate for ALG’s 2023 earnings is pegged at $9.79 per share. This indicates a 13.6% increase from the prior-year reported figure. The consensus estimate for 2023 earnings has moved north by 7.5% in the past 60 days. Its shares gained 21.3% in the last year.

The Zacks Consensus Estimate for Illinois Tool Works’ fiscal 2023 earnings per share is pegged at $9.61, suggesting an increase of 4.8% from that reported in the last year. The consensus estimate for fiscal 2023 earnings moved 4% upward in the last 60 days. ITW has a trailing four-quarter average earnings surprise of 0.9%. Its shares gained 8% in the last year.

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