Terex Corp. – Value Analysis (NYSE:TEX) : November 14, 2017

Capitalcube gives Terex Corp. a score of 9.

Our analysis is based on comparing Terex Corp. with the following peers – Manitowoc Company, Inc., Astec Industries, Inc., Columbus McKinnon Corporation, Manitex International, Inc., Caterpillar Inc., Hyster-Yale Materials Handling, Inc. Class A, Oshkosh Corp, PALFINGER AG Sponsored ADR and NACCO Industries, Inc. Class A (MTW-US, ASTE-US, CMCO-US, MNTX-US, CAT-US, HY-US, OSK-US, PLFRY-US and NC-US).

Investment Outlook

Terex Corp. has a fundamental score of 9 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • With respect to peers, relative outperformance over the last year is in contrast to the more recent underperformance.
  • It currently trades at a Price/Book ratio of (2.72).
  • TEX-US‘s EBITDA-based price implies better than peer median growth.The market seems to expect a turnaround in the company’s current EBITDA-based return on equity.
  • TEX-US has relatively low profit margins and median asset efficiency.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • TEX-US‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • While TEX-US‘s revenues have increased slower than peer median, the market currently gives the company a higher than peer median Price/EBITDA ratio and may be factoring in some sort of a strategic play.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.
  • TEX-US seems too levered to raise additional debt.

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Leverage & Liquidity

TEX-US would seem to have a hard time raising additional debt.

  • With debt at a relatively high 35.06% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 29.77%), and relatively tight interest coverage level of 0.77x, TEX-US would have a hard time raising much additional debt. The company has a Constrained profile in terms of its ability to take on further debt.
  • All 9 peers for the company have an outstanding debt balance.

TEX-US has moved to a Limited Flexibility from a relatively high leverage profile at the recent year-end.

  • TEX-US‘s interest coverage is its lowest relative to the last five years and compares to a high of 3.72x in 2014.
  • While its interest coverage decreased to 0.77x from 2.09x (in 2016), its peer median increased during this period to 4.59x from 3.51x.
  • Interest coverage fell 2.40 points relative to peers. It is also below the 2.50x coverage benchmark unlike the peer median.
  • TEX-US‘s debt-EV is less than (but within one standard deviation of) its five-year average debt-EV of 41.27%.
  • Though its debt-EV has remained relatively stable at 35.06% compared to 2016, its peer median has decreased to 29.77% from 35.06% during this period.
  • Relative to peers, debt-EV rose 5.30 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Manitowoc Company, Inc. 26.86 1.76 -0.07 -3.29
Astec Industries, Inc. 0.76 3.44 58.38 1643.34
Columbus McKinnon Corporation 46.63 1.96 3.26 18.32
Manitex International, Inc. 52.18 1.38 -0.47 -17.22
Caterpillar Inc. 43.76 1.44 7.53 15.81
Hyster-Yale Materials Handling, Inc. Class A 17.31 1.64 5.93 31.52
Oshkosh Corp N/A 1.81 7.74 52.61
PALFINGER AG Sponsored ADR 29.77 1.75 7.41 31.62
NACCO Industries, Inc. Class A 20.17 3.8 -0.92 58.16
Terex Corporation 35.06 2.42 0.77 26.31
Peer Median 29.77 1.78 4.59 28.92
Best In Class 0.76 3.8 58.38 1643.34

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Company Profile

Terex Corp. engages in manufacture of machinery products. It operates through the following business segments: Aerial Work Platforms; Construction; Cranes; Material Handling and Port Solutions; and Materials Processing. The Aerial Work Platforms segment designs, manufactures, services and markets aerial work platform equipment, telehandlers, light towers, bridge inspection equipment and utility equipment. The Construction segment includes compact construction equipment, such as loader backhoes; mini and midi excavators; site dumpers; compaction rollers; and other equipment, such as material handlers, concrete mixer trucks and concrete pavers. The Cranes segment provides mobile telescopic cranes, tower cranes, lattice boom crawler cranes, lattice boom truck cranes and truck-mounted cranes. The Material Handling and Port Solutions segment offers universal cranes, process cranes, rope and chain hoists, electric motors, light crane systems and crane components. The Materials Processing segment includes materials processing equipment, such as crushers, washing systems, screens, apron feeders, chippers and related components and replacement parts. The company was founded in October 1986 and is headquartered in Westport, CT.

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