Terex: Big Infrastructure Winner

Jun. 2.08 | About: Terex Corporation (TEX)

Terex (NYSE:TEX), which is based in Westport, Connecticut, plays in the same big sandbox as Cummins (NYSE:CMI), Caterpillar (NYSE:CAT), and Komatsu (OTCPK:KMTUY). It differs in product mix with more equipment geared towards highway construction, drilling, mining, and military procurement. The company also does sizeable business with the waste management and forestry industries. In sum, this is a company that builds heavy construction machinery and delivers it worldwide. In fact, 65% of its business is done overseas which is good considering the slowing American economy

During the 1990s, the company went on an acquisition spree which drove up debt and diverted management attention. Since then, they have focused on reducing costs, controlling debt, and enhancing profitability. In 2007, the company reported top-line growth of 20% and saw margins expand by120 basis points to 10.5%.

In the first quarter of this year (see conference call transcript), Terex earned $163.3 million ($1.59 per share), compared to $113.8 million ($1.09 per share), for the first quarter of 2007 (all figures in U.S. dollars). That represents an increase in EPS of 46%. Net sales were almost $2.4 billion, an increase of 17.4% from just over $2 billion in the first quarter last year.

The company has a goal of reaching $12 billion in sales with a 12% operating margin by 2010 and that looks to be very possible. If we slip into a global recession, all bets are off, but the long-term prospects for infrastructure companies worldwide are excellent and Terex will be one of the big winners.

The shares closed in New York Friday at $71.35.

Action now: Buy with a target of $85.

Disclosure: Author has a long position in TEX