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Terex (TEX) Upgraded to Buy on Organizational Restructuring


On Jul 11, Terex Corporation TEX was upgraded to a Zacks Rank #2 (Buy), mainly driven by consistent progress on refocusing its portfolio and organizational structure.

Going by the Zacks model, companies holding a Zacks Rank #2 have chances of performing better than the broader market in the quarters ahead.

Year to date, the company has outperformed the Zacks categorized Machinery-Construction/Mining sub-industry with respect to price performance. The stock rallied 17.9%, while the industry recorded 13.4% growth.

What’s Driving the Stock?

Terex is simplifying its organizational structure and continues to progress on refocusing its portfolio by reducing the company’s global footprint and cost structure. The company exited the Coventry facility and also closed Jinan, the Cranes manufacturing unit in China. It has also agreed to sell the loader backhoe business in India. Terex also shut down an underperforming business in Brazil.

Further, Terex took additional steps in first-quarter 2017 to focus on its core Aerial Work Platforms, Cranes and Material Processing businesses. A major step was closing the Material Handling & Port Solutions (MHPS) sale on schedule in Jan 2017. The company also completed the previously announced sale of its Coventry, England-based dumper and loader backhoe business.

Recently, Terex completed the sale of 8.9% of the total shares outstanding of Konecranes Plc. This sale is in line with the company’s efforts to simplify its structure, systems and footprint, in a bid to improve efficiency and enhance global competitiveness.

Notably, the company raised its 2017 earnings per share outlook to the $0.80–$0.95 range. It continues to reduce its cost structure, with emphasis on general and administrative expenses. Moreover, Terex will continue to implement cost-reduction plans over the balance of 2017.

Terex also has a positive record of earnings surprise for the last few quarters. Investors seem to be optimistic about the company’s future prospects, given that its estimates moved up 3.2% for fiscal 2017 and 5.1% for fiscal 2018, over the past 30 days.

Other Stocks to Consider

Other top-ranked stocks in the same sector are Apogee Enterprises, Inc. APOG, Lakeland Industries, Inc. LAKE and Deere & Company DE. All three stocks boast a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Apogee has an average positive earnings surprise of 3.42% for the trailing four quarters. Lakeland generated an average positive earnings surprise of 49.26% over the past four quarters. Deere has an average positive earnings surprise of 70.41% for the trailing four quarters.

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