A compelling value: Terex Corp. (TEX-NYSE) $14 3/8
Terex makes earthmoving equipment, giant cranes, and other heavy construction machines. The company been growing very rapidly in recent years through acquisition. Revenues have more than doubled in the last two years, from $842MM in '97 to $1.85B in '99. The company has remained profitable throughout the period. Concensus EPS (six analysts) is $3.90 for 2000, which would give TEX a bona fide PE of 3.7.
The company's earnings reports are complicated by numerous one-time items, special charges and changes in accounting treatment for income taxes, making year over year comparison's difficult. Also, the company is highly leveraged (2.6 to 1 debt to equity). These factors have undoubtedly contributed to the investing public's discouragement with Terex over the past 6 months, during which time the stock has declined 54%.
Now Terex trades below book value and at 21% of revenues. By comparison, Caterpillar, which has shown zero growth and declining earnings in recent years, trades at 2.7 times book value and 75% of revenues.
Two insiders have purchased $135,000 of TEX since February 2000.
Management has stated that the company will focus on improving its capital structure in 2000. This, and some more easily understandable earnings reports, should bring some renewed interest to TEX over the next 12 months.
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