Terex: Overlooked Bargain

Terex (TEX) sells cranes, among other things.  This is a play on urbanization.  You’ve heard the word before.  It’s this generation's form of the baby boom, sort of.  People all over the planet are moving towards cities.  It started when condos started skyrocketing a decade ago, or so.  They also sell equipment for mining, forestry, roads, and recycling.

They just announced earnings tonight, and beat by a mile.  They reiterated sales targets but warned margins would be hurt by rising steel costs.  They said they were going higher with their own prices to reflect this problem.

A $5B company, which after the release of this quarter earlier this evening, has trailing EPS of $7.03.  The company is growing, I can assure you.  Based solely on everything I’ve said, what is the stock worth?  Give it a PE of 10, it’d be a bargain at $70.  Or, by discounting cash flows, it’s easy to make a case for a $90 stock.  But no, this one could have been purchased all day long today, at $50.  I’m looking forward to tomorrow.

I’m long, from $44, and I bought more today, then again in the after hours.

Comments

[John L.:]

This is an infrastructure and mining play where most profits will be made in the developing countries.

They make more than cranes, they make road making equipment, trucks used in mining operations, lift devices for utilities, frankly, they have a very diverse range of products.

Probably are suffering from the credit crunch since customers need to borrow to buy their equipment. As this subsides, they should start growing again like crazy.

Some folks have said they have the same potential as a Joy Global or a Bucyrus but they have a much more diversified market than these 2 equipment makers.

2008 Jul 23 11:25 PM

[Kamal Ahuja:]

TEX reported very good quarterly results yesterday, with strength in cranes and mining overshadowing some weakness in aerial work platforms and roadbuiding. I am pleased to see the company buying $500 million of its own stock (reaffirms faith in their own business outlook). But what really amazed me this week was CAT revenue guidance of $50 billion for 2008. Did you know $50 billion was Jim Owens (CAT Chairman/CEO) target for 2010? Both CAT and TEX are down $2 -$3 this morning. AP reports that "shares of heavy equipment maker Caterpillar fall as investors eye projected steel-price hikes". The market always needs something to worry about! CAT announced corresponding price increases to offset rising materials costs. I believe that both companies are excellent buying opportunities at this price level.

2008 Jul 24 12:33 PM

[Urbane Gori...:]

JOYG and BUCY are based on the expected growth of coal. TEX is not tied to the coal story.

Thx jegan ;-)

2008 Jul 24 12:58 PM

[Tim Plaehn:]

From my experience in commercial equipment, Terex's customer base in the U.S. consists of construction equipment rental companies, larger construction companies, utilities and governments. The current real estate down turn has put a serious crimp in the $$$ for all of those areas.

I do not know the breakdown for Terex of international vs. domestic sales. Also, look at product mix vs. customer vs. region to find where the slowing and growth lie in relation to the company's product sales.

I applaud your belief in a beaten down stock and the market may be very well over reacting to the problems which may not have that big an effect on sales and earnings. Just dig a little to see where the company's revenues come from.

2008 Jul 24 01:27 PM